2012 – The Equity Year That Was

The year gone by was a turbulent one for the global markets in terms of the sheer number of events and the magnitude of their impact. Marked by a worsening situation in Europe, a severely affected China, and signs of recovery in the US that were marred by nervousness over the fiscal cliff – in all, the year wasn’t all that cheery for the equity markets.

The trends have been varying across economies. The US had been upbeat over the improvement in housing data, a pick-up in retail sales and better employment data. However, the markets were heavily jolted by Hurricane Sandy and the elusiveness around a resolution for the fiscal cliff. On an average, the US markets climbed 10.33% in 2012.

In Europe, drama continued around the ‘Grexit’ and the speculated bailout requirements of Spain. While the Euro-zone was hit by a double-dip recession, Britain managed to pull out of it in the third quarter. In comparison though, relatively well-off economies like France and Germany managed to perform way better. While the FTSE rose 5.84% in 2012, the DAX and CAC climbed by 29.05% and 14.88% respectively.

Among the PIIGS (Portugal, Ireland, Italy, Greece and Spain) nations, the performance of Greece was noteworthy. The Greek ASE saw a 35.28% rise resulting out of the continued inflow of funds and the efforts put into meeting the requisites of availing bailout funds. On the other hand, Spain’s index IBEX35 dropped 5.30% in 2012 due to worries over the country’s requirement of funds versus the country’s denial of need.

Amid this situation, the emerging markets became the desired location for parking funds. Among the BRIC nations, export-oriented China was the most strongly hit due to the global slowdown. Falling shipments were accompanied by reduced manufacturing. The situation in China started to improve towards the end of the year, and the Shanghai Composite appreciated by a modest 3.16%.

Sensex Performance In 2012

Indian indices were the best performers among those in the emerging markets. Although a logjam on the reforms front and inaction on the monetary front saw tepid movement in the first half of the year, the passage of various bills and mild easing of inflation resulted in a robust upside movement in the second half, taking the Sensex up by 25.70%.

Of the sectoral indices on the BSE, the outperformers included Banks, Real Estate, FMCG, Consumer Durables, Auto, Healthcare and Capital Goods. Banks saw tremendous growth due to the strong performance of private banks and over rising hopes of a rate cut. At the same time, a negative outlook on the demand for technology services led to a depreciation in the IT and Teck indices.

In the BSE ‘A Group’ stocks, the top 10 performers and the top underperformers were: