As DIIs counter FIIs, stocks stay range-bound

Range-bound -- that’s how the equity markets were in 2013. Benchmark indices delivered single-digit returns, the third worst in the last decade in percentage terms.

The Sensex ended the year on a high at 21,170.68 but the overall gain in 2013 was restricted to almost 9% or 1743.97 points as heavy selling by domestic institutional investors or DIIs countered the strong buying by foreign institutional investors or FIIs. In terms of movement on a year-end basis, this is the smallest since 2002 when the index had gained a mere 3.52%.

About 75% of the full-year rise in the Sensex can be attributed to only two IT majors: Infosys (Infy) and TCS. Infy lifted the Sensex 667.83 points with TCS pushing up the index a further 626.84 points.

On the other hand, the Nifty gained 6.76% to close at 6,304 while the MCX-SX gained 10.51% to end at 12,582.69.

Indian stocks that were among the top performers globally in 2012, turned out to be laggards in 2013. The Dow Jones Industrial Average gained 25.95%, while major European indices rose 15-25% and Japanese Nikkei 225 yielded 56.72% returns in local currency terms.

The gains in 2013 were mostly restricted to frontline stocks as the mid-cap and small-cap indices fell with losses of 5.73% and 11.23% respectively. The broader market returns, too, were muted as the BSE 200 and BSE 500 indices yielded 4.38% and 3.25% returns respectively.

Among the sectors, defensive stocks from information technology and healthcare stole the limelight.

Experts see the performance of IT and pharma sectors getting stronger this year as improvement in global growth along with rupee weakness is likely to benefit these companies.

“Within defensives, we like select stocks in the IT, FMCG, media and private sector banks. We are positive on the IT sector as it is expected to see improved demand from US and stability in the euro zone, said Dipen Shah, head, private client group research, at Kotak Securities.

This year is likely to be better for broader markets as the expected economic revival is likely to benefit small and mid-cap stocks, market players said.

Shachindra Nath, group CEO, Religare Enterprises, believes that the worst is possibly over and sees 2014 as the year of economic growth backed by a pick-up in exports and strong demand from rural India.

owever analysts expect volatility to continue at least in the first half of the year.

“The concerns over the next few months will be about the pace of the Fed tapering and the outcome of general elections in April-May 2014,” said Shah.