Sensex, Nifty gain for 9th straight year; Mid-, SmallCap up 3-fold in 5 yrs

Capital market-related stocks like KFin Technologies, Motilal Oswal Financial Services, BSE, and Central Depository Services (India) are on the top of the list, zooming up to 201 per cent in CY24.

Despite the recent correction, domestic stock markets are ending calendar year 2024 (CY24) on a positive note. The NSE Nifty 50 and the BSE Sensex have rallied 9 per cent so far this year – clocking their 9th consecutive year of positive gains – lifted by institutional investors, especially the domestic mutual funds (MF).

 

By comparison, the Nifty and BSE Sensex indices had rallied 20 per cent in the previous calendar year (CY23). Since CY16, the benchmark indices have zoomed 200 per cent. In the broader markets, the mid-, and small-cap indices have recorded robust returns of over 200 per cent each in the last five years. The Nifty MidCap index has skyrocketed 234 per cent and the SmallCap index 221 per cent during the period.

 

 

They, however, have rallied 24 per cent thus far in 2024, lower than their 47-per cent and 56-per cent surge, respectively, in CY23.

 

Individually, out of 501 stocks, which represent the BSE 500, the Nifty MidCap 100, and the Nifty SmallCap 100 index, a total of 27 stocks have more than doubled in CY24. Capital market-related stocks like KFin Technologies, Motilal Oswal Financial Services, BSE, and Central Depository Services (India) (CDSL) are on the top of the list, zooming up to 201 per cent. 

 

Meanwhile, Oracle Financial Services, PB Fintech (the parent company of Policybazaar), Newgen Software Technologies, and Zomato from information technology and fintech sector; and Kaynes Technologies, Dixon Technologies, Amber Enterprises, and Blue Star from the consumer durables sector saw their market price more-than-doubling during the period.

 

Among sectors, the Nifty Fast Moving Consumer Goods (FMCG) and the Nifty Private Bank index underperformed the market by recording negative returns of 1.3 per cent and 0.03 per cent, respectively. The Nifty Bank and the Nifty Energy index, on the flipside, gained 6 per cent and 5.1 per cent, respectively.

 

The Nifty Realty index was the top performer among sectoral indices, soaring 37.6 per cent in CY24. This was followed by the Nifty Pharma index (34.9 per cent), the Nifty IT and Nifty Auto (23 per cent each), the Nifty Infrastructure (16.8 per cent), the Nifty PSU Bank (16 per cent), and the Nifty Metal (10.4 per cent).

 

2024: A tale of two halves

 

Calendar year 2024 was marked by two phases. The first half of the year 2024 saw robust corporate earnings, a surge in domestic flows, and a resilient macro landscape, driving the Nifty to an all-time high of 26,277 and the Sensex to 85,978.25 in September 2024. However, the market underwent a sharp correction thereafter, falling 9 per cent from its all-time high amid unprecedented selling by foreign institutional investors (FIIs).

 

Earnings moderation and elevated valuations in the mid-caps and small caps, along with a stronger dollar index after Donald Trump’s victory in the US Presidential elections, led to FIIs shifting away from India. 

 

“There is a direct correlation between Nifty performance and FII inflows. CY24, too, saw significant sell-off from FPIs in the secondary markets, where they offloaded nearly Rs 1.1 trillion from the secondary markets during October and November, resulting in a 10-per cent decline in the headline indices in the last few months. Despite these outflows, the Nifty has given near 9-per cent returns during the year as liquidity support was observed from other venues,” ICICI Securities said.

 

Domestic institutional investors (DIIs) made a record net inflow of Rs 5.14 trillion in equities during CY24. Of these, MFs pumped in a net amount of Rs 4.17 trillion. Foreign portfolio investors (FPIs), however, pumped in barely Rs 1,656 crore in CY24, after a record net investment of Rs 1.71 trillion in CY23. NSDL data shows.

 

Moreover, in the last five calendar years, DIIs have invested Rs 10.3 trillion in Indian stock markets. Of these, Rs 8.03-trillion worth of investment came from MFs. FPIs, on the other hand, pumped in Rs 2.5 trillion during the same period, data shows.

 

Stock Market Outlook 2025

 

Going into 2025, the Indian stock markets are likely to face significant influences from a combination of global and domestic economic events. The anticipated rate cut by the Reserve Bank of India (RBI) in February 2025, the ongoing trend of US rate cuts, and the expectations surrounding trade policy changes during Donald Trump’s US Presidency will contribute to market volatility, analysts said.

 

Additionally, the Union Budget in February 2025, back home will offer important signals to the market.

 

“After a subdued earnings performance in the first half of FY25, earnings are expected to recover in H2, driven by increased rural spending, a buoyant wedding season, and pickup in government spending. Earnings are expected to gain momentum, delivering a 16 per cent compound annual growth rate (CAGR) over FY25-27E,” analysts at Motilal Oswal Financial Services (MOFSL) said.

 

Against this, the recent market correction and the moderation in valuations, the brokerage firm said, offers an opportunity to add selective bottom-up stock ideas from a long-term perspective given the strength of corporate India’s balance sheets and the prospects for robust, profitable growth.