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Stocks end 2016 with 3% gains; volatility, black swan events dominate

SNS | New Delhi |

Fresh buying into front line shares and continued covering of short positions helped markets to end higher for the 4th session on Friday. 

Black Swan events dominated trade in 2016 with the Nifty notching up gains of just 3 per cent this year. 

Both investors and traders would like to forget the previous 12 months that were characterised by excessive volatility and major global and local events. The year started with Indian stocks suffering as a part of a global sell-off due to concerns that Chinese growth, the economic engine of the world, was slowing. As a consequence, the Nifty plunged 17 per cent in the first two months of 2016, bottoming at a 21-month low of 6,820 points. The annual budget, then, triggered a rally that was punctuated by highs and lows as it saw the index topping off at 8,968 points. Events such as the Brexit, in June, and Donald Trump's electoral victory in the US Presidential elections, in November, saw the markets plunge sharply. 

Prime Minister Narendra Modi's demonetisation drive to punish black money holders was the final economic event of the year that influenced stocks negatively. Announced on November 8, Modi's steps to remove the legal tender status of the 1,000-rupee and 500-rupee notes played havoc with market sentiment for a week. The government's decision to suck out 86 per cent currency from the market overnight created a financial vacuum in the economy for about two weeks. The index reacted by falling 7 per cent from its November 8th close. The Nifty closed its account for 2016 with a gain of 239 points, or 3 per cent, at 8,186 points.

Stocks now look forward to demand returning in the $2.2 trillion economy as lower inflation and falling interest rates trigger an urban consumption boom. Good monsoon rains during 2016 and higher cropping patterns point to robust rural incomes in the months ahead. Fund managers expect the impact of demonetisation to wear off in 2-3 quarters.

Meanwhile, here are the major events of the trading day:

* The Nifty ends 2016 with a 3 per cent gain over the past 12 months, at 8,186 points. It closed higher for the 4th day on short covering and bottom fishing in front line shares. Friday's gains amounted to 82 points.

* Friday was also the first day of the new monthly expiry of derivatives contracts. As a consequence, traders went long on PSU banks, FMCG shares and software companies.

* Friday also marked the last trading day of the month, quarter, half year and calendar 2016. Hence, institutional activity was seen on the buy side as it determined the net asset value of hundreds of mutual schemes.

* Aurobindo Pharma, GAIL, ITC, Sun Pharma and Grasim rose between 2.2-3.2 per cent, and were among 43 shares that rose on the Nifty.

* Bharti Infratel, BPCL, Tata Steel, Bajaj Auto and Dr. Reddy's lost 0.1-0.5 per cent, and were among 8 shares that slipped on the index.

* The Sensex rose 260 points, or 1 per cent, to 26,626 points on the Bombay Stock Exchange with Sun Pharma being the top gainer and Tata Steel being the top loser. Hectic volume activity was seen on HDFC and Maruti on the Sensex.

* Bharat Financial, Cholamandalam Finance and Infosys were the top traded shares by value on the NSE.

* JP Associates soared 8 per cent on very heavy volumes. Ashok Leyland and Engineers India were heavily traded as well.

* Broader markets saw strong buying with the NSE 100, 200 and 500 indices rising about 1 per cent each.

* All sectoral indices rose smartly. Gains ranged between 0.4-1.7 per cent.

* The bulls were in command of sentiment on the last trading day with 1,760 shares rising versus 792 that fell.