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Stock markets will end 2024 with positive returns despite roller coaster ride

Stock markets will end 2024 with positive returns despite roller coaster ride

Dalal Street has had a rollercoaster ride in 2024, from record highs to sharp late corrections, but stock markets still rewarded investors with positive returns, driven by increased domestic fund flows and a macro landscape. resilient economy.

The first half of the year was marked by robust corporate profits, increased domestic flows and a resilient macroeconomic landscape, pushing the Nifty to an all-time high of 26,277.35 in September 2024, according to Motilal Oswal Wealth Management.

“Over the past two months, the market has corrected from its all-time high. The correction marked the third major decline since the COVID-19 pandemic in 2020, with unprecedented selling by foreign institutional investors (FIIs) due to a combination of domestic factors. and global factors,” he said in a note.

As of December 27, the benchmark BSE Sensex gained 6,458.81 points or 8.94 percent while the NSE Nifty climbed 2,082 points or 9.58 percent.

The year was marked by significant events, with the Indian general elections and the US presidential elections taking center stage.

Stock markets have also been grappling with two major geopolitical unrest: the Israel-Iran conflict and the ongoing war between Russia and Ukraine.

“2024 has been a year of tug-of-war between the bulls and the bears, marked by volatility primarily driven by global microeconomic data, followed by geopolitical tensions impacting the markets.

“Despite all the uncertainties around the world, Indian markets have maintained the pressure and generated very decent returns.

“It was also a year of valuation peaking, making Indian markets the most expensive in the world.

“As excess liquidity in the market pushed valuations as high as possible, overtaking fundamental theories that ultimately caused corrections in markets from above,” said Prashanth Tapse, senior vice president of research and Research Analyst at Mehta Equities Ltd.

The benchmark BSE Sensex touched its all-time high of 85,978.25 on September 27 this year, and the NSE Nifty also touched its lifetime high of 26,277.35 on the same day.

“2024 marked the ninth consecutive year of gains for the Indian stock market.

“Despite a challenging final quarter, the market delivered strong returns for the year, with mid- and small-cap stocks outperforming and rewarding investors handsomely.

“However, benchmark indices like the Nifty and Sensex are lagging their global counterparts, especially the US markets. This underperformance is largely due to persistent and aggressive selling by FIIs,” Santosh Meena said , Head of Research at Swastika Investmart Ltd.

Compared to September’s all-time highs, the benchmark BSE index is down 8.46 per cent while Nifty has lost 9.37 per cent from the all-time high.

The challenges deepened last quarter, as disappointing corporate profits and weaker-than-expected economic growth further weakened investor confidence, contributing to the lackluster performance of major indexes, Meena said.

Markets were attacked downward from October due to fears of foreign investors fleeing the domestic market and strained valuations.

In October alone, the benchmark BSE index fell 4,910.72 points or 5.82 percent, and the Nifty fell 1,605.5 points or 6.22 percent.

So far in December, the benchmark Sensex is down 1,103.72 points, or 1.38 percent.

October saw an unprecedented foreign fund outflow of Rs 94,017 crore – the largest monthly withdrawal on record – amid increased allocations to China, shrinking corporate profits and high valuations of Indian stocks .

“On a positive note, the start of the rate reduction cycle in the United States has brought a tailwind to global stock markets.

“However, the Indian stock market has been facing headwinds due to record levels of aggressive selling by FIIs.

“Adding to the challenges, India Inc.’s disappointing second-quarter results and slowing GDP growth have further dampened investor sentiment,” Meena said.

In 2023, the benchmark BSE index jumped 11,399.52 points or 18.73 percent, and the Nifty climbed 3,626.1 points or 20 percent.

This year, in addition to the general elections in India, markets have witnessed a tight rate cycle by the RBI to fight inflation, the end of the carry trade on the yen, a rate cut by the American FED, the elections in the United States and the election of Trump as President of the United States. China’s recovery, said Manish Bhandari, CEO and portfolio manager at Vallum Capital Advisors.

The recent market correction has improved valuations and the overall outlook for the Indian stock market remains strong, Meena said.

“On the global front, the trajectory of the global economy under Trump’s leadership will play an important role in shaping investor sentiment and market dynamics.

“Furthermore, FII flows will remain a crucial factor in determining the performance and direction of large-cap stocks, given their outsized influence on market sentiment,” it added.

“Growth-dependent factors would once again be similar to last year, such as geopolitical conflicts, the interest rate path of the US Fed and Donald Trump’s tariff policies, as well as the recovery in profits local businesses followed by national government policies to support growth.

“A lot of attention would be paid to the dynamic relationship between the United States and China,” said Tapse of Mehta Equities Ltd.