6 Reasons Why 2014 Promises To Be A Good Year For The Markets

The year 2013 is about to end, with the Sensex almost gaining round 9% despite a high degree of volatility in the markets. The volatility was such that many investors could not participate in equities. However, 2014 is expected to come with a renewed burst of enthusiasm. For the year ahead, there are some factors that indicate the prospect of some amount of positivity in the markets. Let’s take a look at these.

A majority of the problems were due to the global markets remaining stressed. The larger economies like the US and Europe battled pressures in 2013. This directly impacted the emerging economies and also the export-oriented countries. With the US economy witnessing a stronger-than-expected recovery, it seems that there is a going to be change in sentiments globally. The early start to tapering shows the confidence of the country’s government. The European macro data has also been strong over the past few months.

The second factor is a domestic one, i.e. the much-awaited general elections. Most on the street are expecting the Modi-led BJP government to emerge with the mandate to rule, and we at DSIJ second this expectation. A stable government at the centre would not only end the policy paralysis, but it is hoped that the pro-reforms BJP, which has proved its mettle earlier, will bring the faster reforms.

Third, the RBI’s efforts are likely to pay off and inflation is likely to contract going ahead. Fruit and vegetable prices may decline in January 2014, and this would surely provide the apex bank some headroom to focus on growth.

The fourth factor is the positive undercurrent in the markets. From the earlier mood of pessimism, investor sentiment has taken a turn upwards. More retail investors are participating in the markets now as compared what was seen in the earlier months of 2013.

Fifth is the expected revival of the IPO market. The primary markets have remained dormant for a long period of time, and 2013 saw the lowest number of IPOs in the last 10 years. With the sentiments turning positive, the IPO markets are on a path to revival. This, in turn would bring even more retail participants to the markets.

Last but not the least is the improvement in the macro factors. The Current Account Deficit (CAD) has improved and even the INR has stabilised against the USD. This would bring some solace to the investor fraternity.

If these variables play out favourably and lend support, we feel that the Indian markets are likely to be more promising in 2014. With other asset classes like realty and gold having their own set of problems, 2014 could truly be the year of the equities!