Year 2008 in retrospect

Year 2008 will go down as the most turbulent year in the history of Capital Markets across the globe. Anyone who took the risk of making a prediction about the markets at the beginning of 2008 has been proven wrong by the time the year comes to a close. Here is a summary of the major events that made 2008 as an extraordinary year in the lives of 'Investors':

• Stock Markets in India registered their largest annual decline in history. The sensex recorded a decline of 52.5% over calender year 2008 (Falling from 20287 to 9647). Amongst its peers it is one of the worst performing indices, next only to Shanghai Composite which declined by 65.4%. The valuations of BSE sensex companies (PE Multiple) declined from an average of 27.7 to 12.4 by the close of 2008. During the year the sensex declined to a low of 7697 intraday, and the valuations went down to a pathetic level of 9. Foreign institutional investors took away over $13 billion from the Indian markets.
• Commodity Markets played havoc with the fiscal deficit of the Govt. of India. Prices of base metals the Copper, Nickle, Aluminium and Iron ore went through the roof during mid year, causing a lot of distress to countries like India that are net importers of many of these commodities. Crude oil jumped to a high of $147/ barrel in July amidst excessive speculation, only to fall back to under $40/barrel by the end of the year.
• Inflation played havoc with the budgets of invidual investors. In india WPI inflation peaked out at 12.9% in July, and closed the year at a comfortable level of 6.6%. Due to demand softening, inflation is likely to come down further to the levels of under 4% by the end of this fiscal. This leaves enough room for the Monetrary and Fiscal authorities to increase liquidity and cut interest rates aggressively.
• Gold emerged as one of the best performing asset classes during 2008 giving a return of 4%, making it a eighth consecutive year of gains. Gold continues to glitter and is looking to extend its dream run in the next year as well.
• Political Climate: After a lot of uncertainty and bloodbath, 26/11 marked a turnaround in Indian political scenario. The countrymen and the political leadership rose from their slumber to unite as a nation. The elections conducted immediately after 26/11 gave a clear message that sincerity and hard work will be rewarded by the electorate. By the year end the prospect of a new govt. in J&K under a young CM augers well for return of democracy in the troubled state. In the aftermath of terror attacks, Pakistan was pushed into a corner through diplomatic initiatives, and the involvement of LeT as the perpetrators of terror across the world was established beyond doubt. India also emerged as a strong nation by getting access to nuclear fuel without signing CTBT. ISRO's mission moon 'Chandrayan' also raised the image of India in the world.

The year 2008 has come to a close, let us hope year 2009 will bring a lot of cheer and prosperity to the 'Investor Community'.