The benchmark Nifty50 rose nearly 1 per cent on Thursday, capping off an ebullient 2023-24 that saw domestic equities reach several milestones. The 50-share blue chip index ended the year with a gain of nearly 29 per cent, its best performance since the Covid-affected 2020-21.
Despite the recent selloff, the Nifty Smallcap 100 and the Nifty Midcap 100 indices gained 70 per cent and 60 per cent, respectively.
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Meanwhile, the BSE Sensex jumped 25 per cent during the year.
Excluding FY21 — when stocks rebounded after a drastic plunge in March 2020 — the returns in the current financial year were the best in over a decade.
The mid and small-cap segments emerged as the star performers in FY24, surpassing the benchmark indices by a wide margin. The Nifty Midcap 100 outperformed the Nifty50 by 31.5 percentage points, while the small-cap index outperformed the latter by 41.2 percentage points.
During the year, all three indices hit new record highs on several occasions, and India’s market capitalisation came close to the $5 trillion mark. The broad-based rally in domestic equities saw India’s market capitalisation jump by Rs 50 trillion to finish the year at Rs 387 trillion ($4.7 trillion). India also overtook Hong Kong during the year to become the world’s fourth-largest market.
Despite intermittent volatility, India’s equity markets showed remarkable resilience in FY24, weathering global uncertainties, such as the interest rate hike cycle, a US banking crisis, rising bond yields, and geopolitical conflicts. The markets were buoyed by robust economic growth and moderate oil prices, which improved India’s standing among global peers. After a 29 per cent drop in the previous financial year, oil prices rebounded, rising 7.7 per cent to close at $85 a barrel.
The robustness of the domestic markets was further bolstered by strong inflows from both mutual funds (MFs) and foreign portfolio investors (FPIs). In FY24, MFs and FPIs were net buyers of shares worth Rs 1.9 trillion and Rs 2 trillion, respectively.
The dovish stance of the US Federal Reserve towards the end of the financial year, coupled with the hopes of political stability brought about by the victory of the Bharatiya Janata Party in key state elections, further fuelled the market rally.
“The conviction that the rate hike cycle is coming to an end and the influx of new investors, manifested in the record number of demat openings and new systematic investment plans (SIPs), led to robust gains. Stocks gain either because of the improvement in fundamentals or a rise in stock demand. This year’s gains were driven more by the rise in demand for stocks,” said Chokkalingam G, founder of Equinomics.
In FY24, the Nifty50 outperformed most of its global peers, except the tech-heavy Nasdaq Composite, which rose 34.2 per cent, and Japan’s Nikkei, which rose 43.35 per cent. The MSCI World Index rose 23.1 per cent, while the MSCI Emerging Market Index gained 4.7 per cent.
Market participants are optimistic about the upcoming financial year, despite potential challenges. Analysts suggest that despite the uncertainties of an election year and valuation concerns, India benefits from a combination of stable macroeconomic factors, a resilient banking sector, and minimal corporate leverage.
“An upgrade in the domestic economy forecast suggests a positive outlook for the stock market in FY25. However, the focus is on largecap stocks due to the ongoing premium valuations of midcap stocks, which could pose a concern for the broader market in the short-to-medium term,” said Vinod Nair, head of research at Geojit Financial Services.
In terms of sectors, realty and public sector enterprises (PSUs) saw the most gains this year, with their respective NSE indices rising 132.5 per cent and 104 per cent. Tata Motors and Bajaj Auto were the top performers among Nifty stocks, each rising 2.4 times. UPL was the worst-performing Nifty stock, falling 36 per cent in FY24. Shriram Finance replaced it in the Nifty on Thursday. Besides UPL, Hindustan Unilever and HDFC Bank were the only other Nifty stocks to end the year with losses.
Read More: Strong showing: Markets end year of records on a high; Nifty rises 29% | News on