updated on 10 Jan 2017
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Red flag on key sectors in 2017
Calendar 2016 is a history now, but it has left behind some footprints that can still impact investing decisions in 2017.
For instance, demonetisation of high-value currency notes by the government in November has slowed down the consumption story in the country. There are expectations that India Inc will register tepid earnings growth in December and March quarters.
Likewise, possible interest rate hikes by the US Federal Reserve in 2017 and 2018 in the wake of the surprise victory of Donald Trump in the US presidential election will boost further on the outflow of foreign portfolio capital in the forthcoming months.
At the very start of the New Year, market veterans on Dalal Street have been red-flagging sectors like IT, pharma, real estate, capital goods and even some of the banks, citing the new dynamics of domestic as well as global economies as the US ushers in the Donald Trump era, the US Fed puts its money policy firmly on the upward trajectory, India stares at a low interest rate regime and the Modi government's demonetisation drive leaves the market completely altered for several sectors.
After the cash ban, the flow of unaccounted money into real estate will cease and this will put pressure on demand as well as prices of real estate in the short term. Demonetisation will further impact demand for costly consumer durables products in 2017.
A weak investment scenario will also weigh on the demand for capital goods while the expected new policy initiates by new US President Donald Trump will create a lot of volatility in the IT and pharma sectors.
During the year gone by, the BSE Healthcare index slipped nearly 13 per cent among the sectoral indices of BSE. It was followed by IT (down 8 per cent), consumer durables (down 6.34 per cent) and realty (6 per cent).
The BSE Sensex advanced nearly 2 per cent during the year gone by against a 5 per cent fall in 2015.
Market watchers have also turned cautious on the cement stocks after they registered average returns of 10 per cent in 2016.
Shares of Sanghi Industries, Saurashtra Cement and Orient Cement slipped 24.28 per cent, 23.29 per cent and 16.95 per cent, respectively, over the past 12 months. On the other hand, Dalmia Bharat, Birla Corporation and The Ramco Cement advanced 58 per cent, 40 per cent and 39 per cent, respectively.
Ace investor Rakesh Jhunjhunwala maintained a cautious stance on the banking sector for 2017 due to uncertainties over non-performing assets (NPAs).
The BSE Bankex outperformed benchmark the Sensex last year and surged 7 per cent to 20,748 on December 30, 2016. The banking index stood at 19,328 in December 2015.