The Telegraph
Since 1st March, 1999
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Durable engine in stock gravy train

Which sectors have been the best performing ones in 2005' The first thing to notice is that the markets have been on a roll this year, with the sensex rising by 43.7 per cent in the year to December 23 (between December 23, 2004 and December 23, 2005). That's far better than in the year to December 23, 2004, when the sensex rose a comparatively tame 15.7 per cent.

The star performer this year has been the consumer durables sector, with the BSE Consumer Durables index rising a huge 114.71 per cent. But that's partly because this index was more or less flat during the previous year, and because Titan Industries, which has done extremely well, has a weight of 53 per cent in this index.

A far more solid performance has been that of the BSE Capital Goods Index, which is up 92.1 per cent this year, on top of a 30.2 per cent rise last year. Clearly, the market has no doubts whatsoever about the strength of the recovery in capital expenditure.

Also impressive was the performance of the FMCG sector. The turnaround in this segment, with the cessation of the price wars and the resumption of volume growth being the factors, drove the BSE FMCG Index up 53.2 per cent this year. That's in sharp contrast to the negative 3.2 per cent growth last year. The worst performing sectoral index has been the BSE Healthcare index, where the pressures in US generic prices have been reflected in the index rising by a mere 2.5 per cent this year, compared with a 20.9 per cent rise last year. The BSE Metals index is up a mere 11.4 per cent this year, the fall in steel prices being the obvious dampener.

Market predictions

It's that time of the year again ' the time when crystal balls are polished, tea laves are read and the fortunes for the next year foretold. But before we go into the New Year, here are a few of the predictions that pundits made at the end of 2004.

Almost all of them (except the diehard contrarians) believed that the massive US current account deficit would result in a weaker dollar. Instead, the US dollar index is up 12.5 per cent. Most experts also believed that the flow of funds into emerging markets was a consequence of two factors ' low interest rates in the US that encouraged hedge funds to borrow cheaply and invest in riskier but more lucrative assets and a weak dollar, which led to forex gains on assets denominated in other currencies.

Yet, in 2005, in spite of a weaker dollar and a rising Fed Funds rate, flows to emerging markets were at record levels. There were plenty of people who predicted either a hard or a soft landing for the Chinese economy. But with industrial production growing at over 16 per cent, it's tough to argue that there has been any sort of landing. And back home in India, nobody predicted that the sensex would cross 9000. Given that track record, it's best to take all expert predictions for 2006 with large doses of salt.

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