BANGALORE: As the year comes to an end, investors reflect on the lessons learnt in 2015. In totality, the year had not received good reviews from the asset owning classes when it came to investing in oil, gold, or bonds and equities. It is not long ago that the cost of oil in U.S and the value of Canadian Dollar which fell. An overall investment review of 2015 will help to predict the coming year better, reports, Shyamal Banerjee/Mint
Even if it was not a great year for the public market investors, exceptions were made as the private market grew in size. According to the Goldman and Sachs report, more than 120 new companies in the United States market gained a value over one billion dollars in the private market. In India, bank fixed deposits was the best performing asset that out-performed equity, gold, and property. However, it was highly expected by investors that equities will be the highest performing asset in 2015 due to the reform-oriented economic outlook of the government and the V-shaped cyclical recovery in the economy. As people enjoyed the high returns of bank fixed deposit, faith on the importance of disciplined asset allocation for retail investors to maintain a balance between equities and fixed returns instruments was reinforced.
Another trend observed in 2015 was that the selection of sector did not matter as the inter-sectoral performance deviation was narrowed down this year. As the enterprise value or
Earnings Before Interest and Tax (EBIT) ratio grew better than the price-to-book value for selecting stocks, the focus of investors shifted to individual stocks rather than sectors. Therefore, this year saw the exception of "net-net stocks" where asset value was obviously the best choice.
2015 was also a year of negative returns except for those who invested in mid-capital stocks that out-performed the large-capital stocks (Nifty Mid Cap +2.8 percent versus Nifty 50 -7 percent). A comparative study of the year 2012 and 2015 shows that even though the latter year was a good year for macro-economy, it did not translate into spectacular returns from the
stock markets. In contrast 2012 did not have any development in the macro-level but it marked a great year with 30 percent in market returns. This clearly shows that in the short term macroeconomic fundamentals may not have a positive correlation with market returns.
