Unless the Union Budget 2016, ignites a spark on Feb 29, the Month of Feb is likely to be the worst for the Sensex in 4 years.
All hype created around the new Government has faded and the markets are today below the levels when Narendra Modi was sworn in as the Prime Minister of the country in May 2014. All euphoria and gloss is gone. In two years investors would have got returns of 18 per cent in bank deposits, while the returns are negative at the moment in stocks.
Investors are a frustrated lot and mutual fund investors have got negative returns in 2015 and 2016 seems to be getting worse.
The problem is not only global, it is a fair bit domestic as well. Corporate earnings have been awful to say the least and non performing assets in banks is certainly a cause for concern. According to the Mint, banks that are listed had non performing assets to the tune of Rs 1 trillion in the Dec quarter. Unless, they are capitalized fast, it is difficult to see how economic growth would revive.
International markets have performed much better than Indian markets, despite the crude oil plunge.
The German DAX is down only 1 per cent this month, while the Sensex is down a cool 7 per cent. India is clearly under performing peers and if it was not for domestic institutions the Sensex would have nosedived.
Analysts say that the index is still trading at premium to other markets and it does not deserve to get a premium. For example, the Sensex is valued at 15 times its one year forward EPS, as against a multiple of 10.9 times for the MSCI Emerging Markets Index.
This is a significant premium of 40 per cent. Why would you want to pay a premium for investing in Indian markets, when there is no corporate growth?
All in all, it is going to be a difficult year for the stock markets. If you are already sitting on losses, there is no point in selling at losses. Just hold on and wait for the tide to turn.