Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
2008: The year of reckoning - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Dec 27, 2008

    2008: The year of reckoning

    2008 was the year of reckoning for bubbles formed across asset classes.

    In India, the year began ominously as a much touted IPO listed at an embarrassing opening price. Half way across the world, the signs of an economy in recession were there for all to see. Weak employment data, plummeting house prices, foreclosures and defaults. Soon, investment banks began to tumble like nine pins. And the nightmare had just begun.

    The next few months belonged to crude oil, as it bucked the trend of the equity markets to zoom to US$ 147 per barrel in July. However, from there on, even crude prices collapsed in a heap as the global liquidity crisis turned out to be far worse than anyone initially imagined.

    As another round of bankruptcies hit Wall Street, the US government was left with no option but to step in. And bailout packages worth billions of dollars were announced in a concerted manner by central bankers all around the world. Several US financial institutions also needed direct intervention from the government. Not all companies (read US auto majors) were as lucky.

    Stock markets worldwide fared terribly during the year. While the US declined 36%, Europe was also severely affected. While UK tumbled 35%, France lost almost 45%. It was no different for stock markets in Asia. The emerging giants, China and India, witnessed a precipitous fall, ending all discussions on the much touted 'decoupling theory'. The Chinese market tanked by 65%, while India lost 54%. One reason the 'decoupling theory' fell flat on its face is the importance of foreign Institutional Investors (FIIs) in emerging markets. It's no coincidence that the decline in Indian markets in 2008 coincided with FIIs taking out Rs 528 bn from the system. While domestic mutual funds (MFs) pitched in, net fund inflows on their count totaled up to only Rs 137 bn, not enough to stem the decline in indices.

    Source: Yahoo Finance

    Source: Yahoo Finance

    Source: SEBI

    Source: BSE

    Source: BSE

    Source: BSE

    Table - Indian stocks - Movers and shakers during 2008
    Company 26-Dec-07 26-Dec-08 Change 52-wk High/Low Change from 52-wk High
    Top gainers during 2008 (BSE-A Group)
    Hindustan Unilever 215 252 17.6% 267 / 170 -5.5%
    Hero Honda 700 794 13.5% 895 / 561 -11.3%
    GSK Pharma 1,036 1,126 8.7% 1,212 / 800 -7.1%
    Nestle 1,367 1,410 3.1% 1,880 / 1,200 -25.0%
    Colgate 401 405 1.0% 521 / 341 -22.3%
    Top losers during 2008 (BSE-A Group)
    Jai Corp Ltd 1,172 84 -92.9% 1,450 /79 -94.2%
    Unitech 465 36 -92.2% 547 / 22 -93.4%
    Omaxe Ltd 565 59 -89.5% 585 /39 -89.8%
    Parsvnath Developers 423 45 -89.5% 598 / 31 -92.6%
    Adlabs Films 1,415 166 -88.3% 1,945 / 130 -91.5%

    Source: Equitymaster

    The origins of the global financial meltdown can be traced to the US housing sector. Hence, its not a surprise that the worst performing BSE sectoral index for 2008 was realty, plummeting 83%. With the Olympics behind us and troubling economic conditions ahead, the outlook for commodities, particularly metals turned grim. This is reflected in sectoral index for metals, which declined 75%, making it the 2nd worst performing index.

    Traditionally, FMCG and Pharma sectors are considered to be the best bets in a recessionary environment. It was borne out during the year as their sectoral indices declined the lowest- 15% and 35%, respectively.

    Where do we go from here? Given the grim outlook for the world economy in 2009, it might seem natural to feel fearful. But think again. As Warren Buffett wrote in an editorial in the New York Times, equity markets bottom out before the real economy does. Hence, as we stand at the cusp of a new year, now is the right time to get back to investing.



    Equitymaster requests your view! Post a comment on "2008: The year of reckoning". Click here!


    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    Will They Haul Off Trump's Statue, Too? (Vivek Kaul's Diary)

    Aug 16, 2017

    All across the country, the old gods become devils. New, gluten-free gods take their places...

    This Company Beat the Business World's 'Three Killer Cs' (The 5 Minute Wrapup)

    Aug 16, 2017

    And what it has in common with beating the stock market too.

    5 Steps To Become Financially Independent (Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Let's Hope This Correction Continues (The 5 Minute Wrapup)

    Aug 14, 2017

    Last week's correction is making a number of Super Investor stocks look a lot more attractive...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 16, 2017 (Close)