The market and the economy have their own ways of disproving fortune-tellers. Every year, at least a dozen predictions/assumptions go awry. We have picked 10 of those for 2012, which never materialised.
UPA will be forced to call for mid-term poll: Further additions to the only long list of scams and fractured political strength notwithstanding, the Congress-led UPA coalition managed to cling on to power, disproving prophets who had predicted that a mid-term poll was inevitable.
Indian market will have a mediocre run: Despite very little going India’s way, periodic bursts of foreign fund flows, and reform measures announced by the government changed sentiment. With a 25 percent rise through the calendar, India figured among the best performing markets globally.
FII flows into Indian shares will shrink: The popular belief was that the problems in the Eurozone and US would have repercussions for the global economy, and prompt investors to shun risk assets like emerging market equities. On the contrary, net FII flows of over USD 22 billion into Indian equities was the second highest in a single year.
India's sovereign rating will be downgraded: The crisis has not been fully averted, but one of the oft-repeated predictions was that India would be downgraded by rating agencies this calendar itself. The Finance Minister has managed to keep the wolves from the door for now, but it is still an uphill task ahead.
GDP growth will not fall below 6%: That myth was shattered when GDP growth for the first and second quarters of FY13 averaged 5.4%. After projecting a growth target of 7.6% for the fiscal, the government has now toned down its estimate to 5.7-5.9%, the lowest in a decade.
Inflation will ease, and RBI will cut rates: Inflation showed no signs of easing, despite the slowing economy, as supply side problem and loose fiscal policies hampered RBI’s efforts to check price rise. The central did cut rates by 50 basis points once during the year, but that was about it. Inflation, rather than growth, was RBI’s priority and so the much hoped for continuous easing of rates did not happen.
Kingfisher will overcome its financial woes: Market was betting that even if not by way of direct financial assistance from the government, promoter Vijay Mallya would find some way to keep his pet project afloat in the sky. That was not to be. Hobbled by staff strikes, inability to pay taxes to the government and clear dues of oil companies, Kingfisher has been grounded.
Overvalued FMCG stocks will tumble: When the rest of the market gets cheaper, investors will sell over valued FMCG shares buy other stocks. The theory sounded perfect, but things did not play out that way. Investors continued to chase FMCG shares, arguing that premium valuations were justified as these companies had no substitutes. The BSE-FMCG index rose 47 percent in 2012, compared to a 25 percent gain in the Sensex.
Rising NPAs will spark sell-off in banks: High interest rates and a slowing economy was expected wreck the balance sheets of banks by way of burgeoning non-performing assets. NPAs have risen and bank balance sheets are not in the best of health, but the doomsday scenario predicted by many has not yet unfolded. The BSE Banking index rose 54 percent during the year, against a 25 percent rise in the Sensex.
Builders will be forced to drop prices: Slowing demand last year onwards was expected to force builders to cut property prices. On the contrary, realty prices across the country, particularly in metros, continued to inch. Thanks to tacit support from the political system, and to some extent from the banking industry as well, builders have been able to keep prices firm.