2020: Great Expectations

It was surprising that the markets in India touched new highs in 2019 though these were hard times for the economy. A deeper look reveals that markets thrive on hopes of things turning around in the future through measures adopted in the present. Here’s what market watchers think will be positive for 2020.

- Rajiv Bhuva

Last year ended on a mixed note for the markets. While the benchmark indices—the S&P BSE Sensex, the Nifty 50, and the S&P BSE 500—in absolute terms gained 13.79%, 11.53%, and 7.41%, respectively, the S&P BSE MidCap and S&P BSE SmallCap lost 2.97% and 7.57% during the year.

The benchmark indices may have been touching new highs, but not many portfolios were making money. “The peculiarity in the market has been the concentration of performance in select stocks and the big divergence in performance both within the Nifty 50, as well as compared to mid- and small-cap indices,” says Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.

He says the market has rewarded quality, growth, and steady business, irrespective of a company’s market capitalization (m-cap). A major theme last year was corporate governance and companies which had good, clean managements were rewarded, he says, adding that the trend is unlikely to change in 2020.

Not just equities; the story of the debt market was hardly different. Even with a 135-basis point cut in policy rates by the Reserve Bank of India (RBI), the rate transmission has been muted. “Term premiums stayed elevated until the RBI intervened with ‘Operation Twist’, when it bought long-dated securities and sold short-dated ones,” says Navneet Munot, chief investment officer at SBI Mutual Fund, in his monthly view note for January.