Brace for a roller-coaster ride in markets this year

After a see-sawing 2018, markets maven expect the volatility in the equity market to continue in the first half of the year due to general elections, ongoing trade war between the US and China and crude oil price movements.

"Lower oil prices have created a positive environment for India, but we are downbeat on the economic outlook as we expect the economy to transition from a growth sweet-spot in 2018 to a soft patch in 2019," Nomura said in a report.

"Elections in Q2 2019 should mark a turning point, as political stability and the lagged effects of lower commodity prices should enable a recovery in H2, pushing GDP growth back towards 7% by end-2019 from 6.2% in H1 2019," it said.

Amid swinging fortunes, the Indian market outperformed the global market for the calendar year 2018 with Sensex rising 6.67% and Nifty by 4.09%. However, the BSE Midcap and Smallcap corrected almost 24% and 13%, respectively.

Analysts expect the Midcap and Smallcap indices to see some recovery this year.

Last year, after the Union Budget, the equity market experienced a major fall as the government implemented long-term capital gains which made the investors very cautious. So this year, the Budget will be closely monitored.

India's nominal growth has been subdued growing barely above 11% over the last few years. 2019 could also see marginal improvement in the earnings growth, according to analysts, who see improvement to be marginal unless nominal growth picks up.

"We expect H1 of FY19 to remain volatile on back of uncertainty regarding general elections, Budget for FY20 and a synchronous slowdown in global growth. The second half could see a much more benign environment as economic growth recovers from short-term drags," said Sahil Kapoor, chief market strategist at Edelweiss Investment Research. "Global growth is slowing and would present a credible challenge for domestic growth and foreign flows. The US growth, widely believed to be strong, is likely to slow considerably. Slowing economic growth, drag from global liquidity squeeze and tepid earnings growth is likely to keep markets under pressure for the next few months," he said.

However, Foram Parekh, fundamental analyst, Indiabulls Ventures, said 2019 brings a lot of cheer in the Indian markets in terms of low crude prices, rupee appreciation, lower inflation, earnings recovery and interest rate cut. The Indian markets will be divided into two parts in 2019 -- pre-elections and post-elections. There will be huge volatility as we near the election date. For FY2019, with 5% earnings growth Nifty will hover around 12000 levels.

"The Year 2019 is likely to pan out better than 2018 for investors. On the other hand, the earnings growth outlook is looking promising with banks likely to play an important role in taking the growth trajectory to high double-digit levels in the next fiscal," said Gaurav Dua, head of research at Sharekhan by BNP Paribas said. "Domestically, the unfavourable outcome of the general elections and another year of weaker than expected growth in corporate earnings are a key risk to the markets. Globally, the geopolitical risk and the expected volatility in financial markets caused by monetary tightening by US Federal Reserve could act as a hangover on the markets," he said.

HDFC Securities in a report said that Nifty may touch 12400-mark during the year. "Broader market could do well, especially in H2CY19 on expectations of earnings pickup among Indian corporate post Q4FY19 along with the resumption of FII flows into India around and post general election time. Mutual fund inflows in India are on a structural up move driven by greater financialisation of savings. Softening stance (including a probable rate cut) by the RBI in early 2019 could help valuations," Dhiraj Relli, MD and CEO at HDFC Securities said.

For the financial markets, 2018 was one of the most volatile years. The equity markets had made record lifetime highs last year but again corrected eventually.

Stock market investors had faced many ups and downs, but still, India managed to be one of the best performers on falling crude prices and strengthening rupee.

In 2018, the stock market responded to the geopolitical events majorly. The trade war between the two most powerful financial countries – the US and China – affected the emerging markets. Other events which affected the market throughout the year was Punjab National Bank fraud case, Budget, implementation of LTCG tax, reclassification of mutual fund portfolios, Fed rate hikes, the rise in crude oil prices and the dollar strengthening against most of the currencies in the world. Also, a financial meltdown in Turkey, IL&FS issue leading to liquidity concerns in NBFCs, the sudden resignation of the Reserve Bank of India governor, state elections also worried the investors last year.

Sensex and Nifty in 2018 had touched a lifetime record. Till August 28, the Sensex had gained 5,083 points, or 15.04%, when it made a record high of 38896.63. The 30-share index had started the year's journey at 33812.75.

But soon it corrected from August's high by 2,819.91 points, or 7.25%. Sensex bid adieu to 2018 on a flat note ending at 36068.33 down 8.39%, or 0.02%.

The broader Nifty also had touched its lifetime high on August 28 closing at 11738.50. From January 1, 2018, till August 28, it had gained 1,301.95 points, or 12.49%. By the end of the year, the 50-share index corrected almost 878.60 points, or 7.48% from its record high. On January 1, Nifty started its journey at 10435.55 but ended the year at 10862.55 rising 2.65 points, or 0.02%. The net change of the year was 427 points up, or 4.09%.