New Delhi: Cumulatively, the past 12 months have been stellar for investors who parked their money in Indian stocks. Though there has been some turbulence, first during the Adani-Hindenburg episode and lately during the initial days of the Israel-Hamas war, the calendar year 2023 gave handsome monetary dividends to stock market investors.
By far in 2023, Sensex and Nifty gained 16-17 per cent, on a cumulative basis. They gained a mere 3 per cent each in the same period of 2022.
Firm GDP growth forecast, inflation at manageable levels, political stability at the central government level, and signs that the central banks world over are done with their monetary policy tightening have painted a bright picture for India - which many agencies have termed to be the fastest-growing major economy.
"Despite a turbulent start in 2023, plagued by inflation anxieties, interest rate jitters, and murmurs of a global recession, the Indian market defied all expectations and is poised to finish the year with a resounding victory.
While the Adani saga and the Israel-Palestine conflict threw temporary wrenches in its progress, the market navigated these challenges with remarkable maturity, showcasing its inherent resilience," says Sunil Nyati, Managing Director, of Swastika Investmart, a stock broking services company.
The strong inflow of funds from foreign portfolio investors (FPIs) lately also supported the stocks to march towards all-time highs. Notably, foreign portfolio investors have again trained their sight towards India, becoming net buyers in the country's stock market.
Following a cumulative accumulation of Rs 9,001 crore in November, they have again made a beeline to invest in Indian stock markets, with Rs 57,313 crore invested so far in December, data from the National Securities Depository (NSDL) showed.
The latest inflow comes at a time when India reported strong quarterly growth maintaining its fastest-growing major economy tag, inflation in a comfortable zone, and political stability in the run-up to General Elections 2024.
Harjeet Singh Arora, Managing Director of Mastertrust, a stock trading and investment broker company, says, "The market in 2023 had been a roller coaster. There was a net inflow of funds from FII during the earlier part of the year from March to July which was followed by a net outflow of funds for the next three months due to the rising tension and increasing global interest rates. The foreign institutional investors then again started buying from November due to the positive sentiments around the Indian markets."
"The BJP's victories in three states fuelled optimism in the Indian markets, particularly due to its strong performance in the Hindi heartland, a key support base. The market anticipates the ruling government's return, and any outcome contrary to investors' expectations may lead to a downturn in the stock market," Arora adds.
The recent upward revision in India's GDP growth forecast by the Reserve Bank of India (RBI) also came as a shot in the arm.
While maintaining the status quo in key policy rates for the fifth straight occasion, RBI has raised the growth forecast for the financial year 2023-24 by 50 basis points to 7 per cent. In its October meeting, the RBI forecast 2023-24 growth at 6.5 per cent. The Indian economy grew 7.6 per cent during the July-September quarter of the current financial year 2023-24, remaining the fastest-growing major economy. India's GDP growth for the April-June quarter grew 7.8 per cent.
IMF, in its Article IV consultation report, which reviews a country's current and medium-term economic outlook, earlier this month said that India's growth is expected to remain strong, supported by macroeconomic and financial stability.
"Despite widespread global uncertainty, India is expected to grow above 6 per cent over the next five years driven by continued strong investment, still-growing private consumption, and digitalization-driven productivity gains," the IMF had noted.
Notably, Indian stock indices - Sensex and Nifty -- have off late hit multiple all-time highs, attributable to multiple macroeconomic fundamentals mentioned in this article.
"The interest rates seem to have peaked, leading to decline in bond yields and US dollar index. US Fed in its last monetary policy for 2023 hinted at three rate cuts in 2024, which has led to huge optimism globally and (hopes that) other central banks are likely to join soon," Motilal Oswal Broking and Distribution says.
That said, the undertone volatility though remains owing to the ongoing wars.
"India remains a shining star and is expected to maintain its outperformance. We expect market sentiment to strengthen further as the ongoing pre-election rally is likely to continue. Any rate cut would provide an additional boost to the market. Given the government's focus approach towards long-term capex across key areas, along with expectations of rate cuts globally in 2024, growth stocks will be in focus," Motilal Oswal Broking and Distribution adds.
It expects banking, financial services and insurance (BFSI), industrials, real estate, auto and consumer discretionary to do well going forward into the new calendar year. Top Picks are SBI, Hero Moto, Spandana Sphoorty, L&T, Dalmia Bharat, Tata Consumer, Syrma SGS Technology, Coal India, Prestige, Zomato, L&T Technology Services, Oil India, Sun Pharma, and Kajaria.
Going ahead, according to Siddarth Bhamre - EVP, Head of Research, Religare Broking, the banking, IT, and auto sectors will be beneficiaries of a positive trend in the financial markets.
In relation to the Lok Sabha polls, Bhamre said, he anticipates this positive trend to continue this election season, owing to improving GDP growth, softening of commodity prices, stable inflation trend, and the flow of foreign funds.
However, not everything is gloom and doom in the financial markets, and its onward directions now also hinge on the US Federal Reserve's policy stance and risks that emanate from the ongoing wars.
Anitha Rangan, an economist at Equirus, says, "The two risks are geo-politics which have not faded away and external uncertainties with respect to US economy's recession risks and Fed being able to deliver its promise."
Shrikant Chouhan, Executive Vice President and Head of Equity Research, at Kotak Securities, is of the view that the IT sector would do well if the US Federal Reserve loosened its monetary policy stance.
Asked about any particular sector or specific trends that he noted moving on into the new year, Chouhan said, "We prefer banking, financial services and insurance (BFSI) as the first place to invest. We also expect the capital goods and infrastructure sector to do well, however, the buying should be done on dips. If the Fed moves to rate cut faster than the expectations then it would help the IT sector to do well."
The year 2023 also has been strong for Initial Public Offerings, with most companies making their debut on the exchanges with a sizable premium.
According to Manoranjan Sharma, Chief Economist at Infomerics Ratings, Indian startups have raised USD 10 billion through IPOs so far this year -- exceeding what was raised in the last three years. More importantly, he noted that the pipeline for future public listings remains robust over the next two years.
"...there is a distinct possibility that 150 private firms could potentially list on the stock market over the next 36 months, adding a whopping USD 400 billion of market value over the next 2-3 years," Sharma contends.
"Zomato could be quickly followed by...Ola, and Flipkart leading to a bull run and the India growth story could, in many ways, parallel the Chinese story of the last decade. Tie your seatbelt and enjoy the ride!" Sharma further adds. (ANI)
