Equity

Equity in 2019 – Year in review

By Niivo On 22 August 2019

 

2019 has not been a good year so far for investments in Equity markets. A number of factors have contributed to the poor performance despite the euphoria of NDA coming back to power which signaled continuity of policy.

If we track what has happened to stocks this year by looking at the major domestic indices

Indexes

              2019 Performance

Nifty

                                   1.80%

NSE 100

                                   0.40%

NSE 500

                                  -1.90%

BSE Mid Cap

                                 -12.40%

BSE Small Cap

                                 -14.00%

   
 

Returns till 20th Aug 2019

 

The trend clearly shows the phenomenon called “Flight to Safety”, this means when there is uncertainty in the outlook, money usually chases the larger stocks that are safer.

In this case, Nifty index that is composed of the largest 50 stocks in India by market capitalization have performed the best this year as a whole. Then, smaller stocks have performed relatively worse. The BSE Small cap index that is composed of smallest companies has performed the worst as investors have pulled money out of these stocks.

If analyze the funds that are tracking these indexes as a category

Fund Categories

                             Average

Large Cap

                                1.30%

Mid Cap

                               -5.20%

Small Cap

                               -9.50%

Solution Oriented

                               -0.20%

Aggressive Hybrid

                               -0.50%

Savings Funds

                                2.00%

 

Returns of funds mirror the returns of the benchmarks with some minor differences

--> Large cap funds have under-performed on average versus the Nifty benchmark

--> Mid Cap and Small cap funds have underperformed but on average have performed better than the underlying indices.

--> Other funds that invest in equities but have various other strategies have all largely out-performed the small and mid-cap funds but largely have under-performed the large cap funds (except savings funds).

Where do we go from here is now anyone’s guess. Markets are a leading indicator of the economy, so any up-tick in the economy will show up first in the stock markets, just as the slow-down has shown up with smaller stocks getting beaten up.

In response, if you are investor and you are wondering whether you should Stop your SIP, given the market performance, please read through our article on the topic to understand the factors that you need to consider before taking that drastic step.