2015 is set to see the Sensex give negative returns of close to 6%, which will make it the worst performance for Indian stock markets in the last 4 years. In fact, the Sensex has shed close to 1700 points as we write since the start of the year.
Massive selling by Foreign Portfolio Investors in Aug, Oct, Nov and now in Dec has dragged markets down. A US Fed interest rate hike; Chinese slowdown and lack of reforms in the country have pushed benchmark indices lower.
The biggest drag has been corporate earnings, which is just not picking-up. The stock markets are not heading into 2016 with any great hopes. The worries over a Chinese slowdown and threat of currency devaluation would always remain.
The US Fed may continue to hike interest rates in the next year which is again not good news for India.
The only hope that the markets have at the moment is that the GST may sail through next year. That also one cannot be sure, if it may happen even in the Budget session of Parliament. In fact, if it does not pass in the Budget session, expect foreign portfolio investments to reduce dramatically.
The next major event for the markets would be the Union Budget 2016-17. Most analysts do not expect anything much from it and the focus of the government could be social spending. Setbacks in state and municipal elections may force the NDA to do a re-think.
Should you be buying shares in 2016?
The answer is that you have to be very selective. For example, select pockets like metals and oil and gas stocks have become very cheap. At some point, you may see a rally in commodities and that should push commodity stocks higher.
Crude Oil is also looking a bit oversold and any geo-political tensions may lead to a rally in oil and gas stocks like ONGC and Cairn India.
Banking stocks have also been battered. At some stage next year, we should be seeing NPA worries easing, which is when banking stocks could rally. Also, if economic momentum gathers these stocks could be on fire.
Hence, if you are buying shares in 2016, bet on select pockets. For example, select PSU banking stocks like State Bank of India and Punjab National Bank look a little cheap at the moment. Similarly, ICICI Bank has fallen from levels of Rs 360 to the current levels of Rs 257.
State Bank of India on the other hand has fallen from levels of Rs 336 to the current levels of Rs 228.
So, if you are looking to make money in stocks, you would need to buy cheap. And, the best way to buy cheap would be to look at beaten down names from various sectors. At the moment, you would find good opportunities in the banking and the commodity space. However, wait for corrections before entering into stocks. For example, if you see the Sensex fall below 24,000 points, it maybe a good opportunity to buy.