Unlike in 2011, gold lost sheen but equities partied this year. Only debt behaved on expected lines.
At the cusp of the New Year in 2012, equities never seemed more dreary, nor gold more lustrous. Well, what a faulty perception that was. For 2012 turned the trends of 2011 on its head, with gold going meek and stocks coming up with guns blazing. Only debt behaved itself and panned out more or less the way it was expected to.
EQUITIES SHINE
2011 was marked by one corporate governance lapse after the other, rising interest rates capping profitability, inflation relentlessly pushing up costs and of course, continuing global turmoil. Benchmark indices Sensex and Nifty sank 25 per cent each in 2011, while the wider market gauge BSE 500 dropped 28 per cent. Small-cap stocks nosedived, with their index down 44 per cent then.
2012 has been dogged by more or less the same factors, with the added trouble of sharply slowing GDP growth and industrial production. But FIIs rode to the market’s rescue, along with other titbits of what was taken as good news, such as freeing up the retail and aviation sectors for foreign investment.
What this has translated into is a 25 per cent gain in the Sensex and 27 per cent gain in the Nifty from January to December (until Dec 27, 2012). Holding large-cap funds would have you sitting on average gains of 24 per cent. But it was mid-cap stocks that stole the show, with the BSE Midcap Index shooting up 37 per cent. Mutual funds with a small- and mid-cap focus delivered 38 per cent on an average.
The top performing stocks are a motley crew, featuring reasonably sound companies such as Prestige Estates, Shasun Pharma and Karnataka Bank besides the more dubious ones such as Tuni Textiles. About a tenth of the BSE 500 universe doubled in prices. If you had held stocks such as JK Lakshmi Cement, United Spirits or Wockhardt, you would be sitting on gains of 290 to 458 per cent.
Not that there were no losers. If you had taken a bet on say, the hyped A2Z Maintenance, Praj Industries or Glodyne Technoserve, you would be sitting on losses of 36 to 89 per cent for this year. But even if you weren’t much of a stock picker, a blind shot in the dark would have still had a chance in two of hitting a stock that gained more than the BSE 500’s 30 per cent.
GLOOMY GOLD
Gold has come into its own ever since the global meltdown four years ago. In 2011, gold had a blistering run, hitting a high of $1,888 in September. In domestic markets, rupee gold prices gave a scorching 31 per cent return in 2011, beating inflation hollow for that year.
This year, though, the metal cooled off. Consumer sentiment too began to sour, and jewellery demand world over slackened, partly due to deteriorating Indian demand. Buying by central banks failed to prop up gold prices. International gold prices were up just 3 per cent in 2012.
In India, those banking on the superlative returns of 2011 to give that booster dose to their portfolios were in for a rude shock. While the sharp rupee depreciation that unfolded in this year edged rupee gold prices beyond the Rs 32,000 per ten grams for a brief period in November 2012, it slid back to end the year with an 11 per cent gain. This just about beats inflation which has averaged 9.8 per cent in the past six months. Gains of gold exchange traded funds too hovered around 10 per cent.
DEBT DOES WELL
The only asset class to reflect what was expected of it to some degree was debt. At the start of this year, it was widely expected that interest rates would drop, giving a leg-up to slowing growth. While rates were cut it was not to the extent hoped for.
Still, the top interest rates paid out for 1 to 2 year fixed deposits by banks dropped from 10.5 per cent to 9.5 per cent. Tax-free bond issues too carried lower rates this year than last.
Among longer-term debt funds, gilt funds performed well, with the category managing an average return of 9.8 per cent in the year so far, with the top funds returning as much as 13.8 per cent. Income funds too notched up returns of 9.6 per cent, the top funds managing returns of 12 to 12.6 per cent.
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