Will the Indian markets break the six-year jinx?

Way back in 2015, the benchmark 30-share S&P BSE Sensex ended the year at 26,117.54. It had lost a little over 5 per cent during the year, which was largely attributed to profit-booking as the index had gained nearly 30 per cent in the preceding year. 

That was the last calendar year that the benchmark ended in the red. Since then, the Sensex has gained ground every year making the current calendar year the sixth consecutive year of gains.

While there is still some time left for 2021 to end, only a rapid and steep correction would make this year end in the red as the index has gained 25.44 per cent or 12,179 points in the current calendar year.

Further, the index has gained a little over 130 per cent in the last six years since the close in 2015. That’s a whopping 34,062 points as the index crossed various psychological levels including 30,000, 40,000, 50,000 and most recently 60,000.
Incidentally, while the index has gained in every year starting 2016, the current year has been the second-best in terms of gains with 2017 leading with gains of 27.91 per cent. Barring 2016 when the Sensex rose a mere 1.95 per cent, the barometer has registered a double-digit growth in each of the last six years.

Interestingly, with the latest set of six-year gains, the index has also matched its previous longest run of consecutive year gains. Between 2002 and 2007, the index rose in each year while clocking cumulative gains of a little over 17,000 points or 522 per cent.

In terms of index levels, it rose from 3,262.33 at the end of 2001 to 20,286.99 in 2007. The six-year winning streak was immediately followed by the worst-ever year in terms of losses as the Sensex more than halved in 2008 to end the year at 9,647.31 amidst the global financial crisis. That was a huge 52.45 per cent fall in a single calendar year.

This assumes significance in the context of the current year, which is also the sixth straight year of gains as talks about an impending correction have been going on for long though the index has mostly registered a unilateral rally.

According to Dhiraj Relli, MD and CEO, HDFC Securities, the Indian markets are "more than reasonably valued at this stage and in terms of indices level, the upside is very limited."

"Markets are up for correction. The current euphoria or exuberance is up for a reality check," says Relli.

In the current calendar year, the Sensex has gained in every month since May even though there have been intermittent phases of mild corrections almost every month.

With the Indian benchmarks currently hovering around record levels, a large section of market experts has been stressing on various headwinds including stretched valuations, earnings concerns amidst inflationary and margin pressures and slowing liquidity support among other things.

In a recent report, global financial major CLSA stated that it believes it is time to book profits from the Indian markets. Its concern ranges from rising energy prices to pressure on margins and the withdrawal of RBI stimulus.

Given all these factors, if the Indian markets are able to gain ground in the next year as well, then the six-year jinx will finally be broken.

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