In its latest mid-year economic review, the government has pared down its FY16 growth estimate to 7-7.5% from 8.1-8.5% and said that growth in 2016-17 is unlikely to be significantly higher. The government also averred that it will stick to its fiscal deficit target of 3.9% of GDP. However, it will be challenging to cut the deficit further by 0.4% in FY17. Importantly, the report also wondered whether the country needed a more flexible timeline for its inflation targets.

Next week will be a truncated one because of Christmas and hence we present a quick review of the year 2015 along with stocks and sectors which gained or lost the most in this issue. From a global perspective, China handed over the biggest surprise with a sudden Yuan devaluation ahead of its inclusion in the IMF’s SDR basket.

The US Fed ended the shadow dance and finally (phew..) raised interest rates ending a huge uncertainty towards the fag end of the year and commodities, with crude oil at a decadal low, continued their downslide.

The standout story from Indian market point of view was the return of the domestic investor who pumped in >USD 10 bn - the highest ever in domestic MFs, which in turn, helped cushion some of the impact of FII selling in H2CY15.

Earnings continued to disappoint and the recently concluded quarter saw further downgrades with consensus FY16E Sensex EPS growth coming off 11% since Jan-15, while that of FY17 remained largely flat due to a lower base. Our FY16E Sensex EPS growth came off ~10% since Jan-15 and stands at 8% YoY (Rs 1,539). 

Among sectors, Pharma provided the best returns and Metals, Realty and Power remained laggards. Importantly, benchmark indices disappointed with negative returns whereas, midcaps and small caps fetched positive returns.

Here’s hoping that the year 2016 is a much more rewarding year with the government being able to kickstartcapex, revive the credit cycle, implement critical reforms and steer clear of parliamentary logjams!