Benchmark equity index Sensex rose 11.3% in FY18, with a weak March quarter taking away some of the strong gains, as turmoil in global markets and rising bad loans of state-run banks weighed on investor sentiment.
The highlight for 2018 was domestic institutional investors (DIIs) investing a net Rs1.1 trillion in equities, setting a record. This was powered by strong investments in mutual funds' equity schemes, a trend that is expected to continue.
On the other hand, foreign institutional investors (FIIs) invested a net of mere $3.3 billion, which was less than half of such inflows in the year before.
"The fear of rising interest rates bothered world markets in February, and once that settled, we had Nirav Modi scam which rocked the PSU (public sector unit) bank space, hitting the sentiment on the domestic front," said Amar Ambani - partner and head of research, IIFL Wealth Management Ltd. "While that is still being digested, the trade war fears have gripped markets," he pointed out.
However, on the brighter side, earnings have started looking up, if we leave out PSU banks and pharma," Ambani said, adding he expects Nifty net profits to grow by 14-15% in fiscal year 2019.
However, uncertainty and volatility in the March quarter when the Sensex dropped 3.2% - the most since quarter ended December 2016 - could rule for a while.
"In the near term, we expect the market volatility to continue," Manishi Raychaudhuri, Asia Pacific equity strategist, BNP Paribas said in an e-mail interview on Friday.
"The near future possibly entails under performance by the Indian market relative to Asia, on account of the uncertainties currently prevailing in the Indian market with regard to non-performing assets in the banking sector and the consequent damage that the investment cycle may suffer," said Raychaudhuri.
Over the longer term, however Raychaudhuri remains positive on the Indian market, and has a target of 37,500 points for the Sensex by the end of 2018.
The coming fiscal year, however, has many developments to watch out for, making predictions difficult.
"I think volatility and uncertainty will be the theme for fiscal year 2019. Fiscal year 2018 was a relatively calm and easy year for equities," said Radhika Gupta, CEO, Edelweiss Asset Management Ltd.
"We have state elections and general elections lined up this year. We also need to see how Federal Reserve's policy shapes up, and how trade war developments unfold," said Gupta.
"Its hard to say what's in store with so many developments to watch out for," she added.
Ambani of IIFL agreed.
"The next few months are trickiest to call, and NPA situation is a bother. In quarters to come, PSU banks will report high provisions, and there will be treasury losses due to a spike in treasury yields," said Ambani.
"We can't rule out a 3-5% correction in near term. I am quite optimistic that over 1-1.5 years, there is good money to be made, on the back of earnings recovery and economic growth," added Ambani.
BSE consumer durables, BSE realty and BSE Consumer Discretionary Goods & Services, were the top sectoral gainers, adding 45.91%, 39.37%, and 20.42% respectively.