While it is certainly fun to try and predict what will happen to our investments in 2007, it is more useful - and more instructive - to look back and see what happened in 2006.
01-Jan-2007 •Devangshu Datta
While it is certainly fun to try and predict what will happen to our investments in 2007, it is more useful - and more instructive - to look back and see what happened in 2006. Investing is very much a business of trying to drive forward while looking in the rear-view mirror. That sounds like a dangerous activity until you realise that there's no alternative - the way ahead is invisible and you have no choice but to consult the past.
Our collection of features that make up our cover story too tries to look ahead by drawing lessons from the past.
First, we take a look at some of the best and worst performers of 2006. These include the best and worst sectors, stocks of various capitalisation ranges, new issues, and equity funds. We also have a list of companies that brought investors the maximum gains in 2006. A glance at the sectors that these extreme performers come from, their market capitalisation and their P/E ratios provides a most instructive look at the markets in 2006.
Studying mutual funds' portfolios to see what fund managers' most and least favourite stocks were is always interesting. A comparison of funds' portfolios at the beginning and end of the year shows which way the wind is blowing.
Our main article analyses the stock markets' overall prospects for 2007 and analyses what may lie in store for investors in the coming year. Finally, Devangshu Dutta looks at the factors that will drive the markets in 2007 and explains why it may not be a predictable year.
Market Movers of 2006
Infrastructure happened to be the hottest theme of 2006. Stocks of companies operating in sectors like cement, real estate, construction etc., made big moves on the bourses. While many of the analysts and fund managers continue to remain bullish upon infrastructure, they are wary of the real estate stocks.
What Mutual Funds Bought in 2006
While all-time favourites Infosys Technologies and Reliance Industries continued to attract more funds, fund managers have also put a lot of faith behind the recently-listed Reliance Communications. Apart from that, India Cements has emerged to be one of the most compelling turnaround stories of the past year. It reported positive earnings for the last two financial years (2005 and 2006), after posting losses in the preceding three. And with the optimism for the cement sector still intact, things might just get better for this mid-cap.
What Mutual Funds Sold in 2006
Fund managers got their act right in identifying the losers. Majority of the most sold stocks have posted negative one-year returns. But the most interesting entry in this list is right at the top of the table. At a time when everybody is gung-ho about the Indian banking sector, the country's largest private sector bank found few takers in 2006. Talking about sectors, sugar stocks came under the hammer. Prominent sugar stocks like Bajaj Hindusthan and Balrampur Chini Mills figured among the most sold stocks.