Investors lost Rs 6.4 lakh crore in fiscal year 2011-12

Mumbai: A 345-point rally in sensex on Friday, that came on the back of an assurance from the finance minister that all those investors who have used participatory notes (P-Notes ) to profit from the Indian market anonymously will not be targeted, capped an eventful year. Fiscal 2011-12 has left investors poorer by a little over Rs 6.4 lakh crore as the sensex lost over 2,000 points, or 10.5%, with the highs and lows for the year in the range of 20K and 15K. This came as the rate of inflation remained sticky in the double digits for several months, the benchmark yields on government securities shot past the 9% level and the Indian rupee weakened to record levels against the US dollar, nearing the 55 level in late December, only to come down below 49 on RBI intervention .

Brokers and dealers said that FY12 will be remembered as the year when policy paralysis at the centre reached a new high, with the political parties not only in the opposition, but also those within the ruling ally stalling several of the decisions aimed at liberalizing the economy. Important among those were the backtracking in opening up of the retail segment to FDI, further liberalizing the insurance sector and continuing with high subsidy for several of the petro-products like LPG, diesel and kerosene, even when global crude oil prices remained above the $100 per barrel mark for most part of the year. On the sectoral front, FMCG stocks were the starts, while capital goods, infrastructure , metal and oil & petro stocks were among the worst performers.

The year will also be remembered for record rallies in gold and silver, mainly because of investors’ increasing unease with the traditional asset classes like equity and debt, and the subsequent search around the globe for safer investment avenues . In late April 2012 silver rallied to over Rs 75,000 per kilogram in Mumbai market, while in late mid-November gold reached a new peak at over Rs 29,000 per 10 grams mark. Brokers said with Eurozone economies looking down the barrel and the recovery in the US still on a sticky wicket, it was natural for investors to look for safer options like precious metals.

In the debt market, the year also saw government’s borrowing reaching a new peak, at about Rs 5.10 lakh crore, squeezing out liquidity from the system and pushing up yields on all types of instruments of borrowing , be it benchmark yields on 10-year G-secs, certificates of deposits, state loans, or call money. On the last day of the fiscal, banks’ total demand for funds from RBI’s repo window reached a new all-time peak at 1.97 lakh crore, which indicated the extreme shortage of liquidity in the system.

The last day of FY12, however, witnessed a relief rally after the government tried to soothe the concerns of a number of foreign brokerages and FIIs that genuine investors will not be targeted by the taxmen. As a result , there was all-round rally in the market, with oil & gas, real estate and metal stocks leading the surge. And the 2% spurt in the sensex to 17,404 also made investors richer by about Rs 1.3 lakh crore with BSE’s market capitalization now at Rs 62.2 lakh crore.