Each year Indian equity markets witness diverse magnitude of volatility and growth levels based on global and domestic scenario and investor participation. The year 2018 is also ending at its own pace. The 50-stock index Nifty 50 saw seven months ending in red in the year 2018, compared with just four and five months registering negative returns in the previous two calendar years.
A historical look at the monthly return of this index suggests that the year 2018 has seen the second highest number of months recording negative returns after a gap of seven years in 2011, which saw nine months to suffer the same fate. In fact, year 2011 was the only year in more than two decades that saw the maximum number of months registering a loss.
Tapping the monthly events of the year could well explain the performance. Talking of the S&P BSE Sensex, it finished 2017 at an all-time high closing level of 34,057 and the Indian equity benchmark recorded a 29.56 per cent full-year total return. The small-cap stocks outperformed their midcap and largecap counterparts.
February was a challenging month for the S&P BSE Sensex; the imposition of a capital gains tax on equity investments tested the Indian equity benchmark at the start of the month, before a US-led global equity market selloff dragged the index down further.
The month of March was challenging for global equity markets. Expectations of rate cuts by the Reserve Bank of India provided tailwinds.
Equities faced a challenging environment in June too as trade tensions weighed on global equity markets, contributing to a rise in risk-off sentiment. However, equities posted steady gains during July as the country's strong economic outlook provided tailwinds for growth. The S&P BSE Sensex finished the month at an all-time high of 37,607.
The benchmark index overcame an emerging market sell-off at the start of the month to post eight new all-time highs in August. After closing August at an all-time high, it took a sharp turn downwards in September. The benchmark declined to its worst monthly performance since February 2016, as fears for exports in a worsening environment for global trade weighed on the index.
As a result of foreign fund outflows amid a worsening global outlook, the markets posted a second consecutive monthly decline in October. Rumours that the RBI governor Urjit Patel will resign added to currency pressures. In November, equities gained across the board, possibly benefitting from trade tensions between the US and China. The month of December was marred by weak global cues amid cautious sentiment ahead of general elections next year.