The Nifty 50 index has demonstrated resilience, closing Samvat 2080 with a nearly 25 per cent gain despite an 8 per cent pullback from its peak.
This performance marks one of the best years for the index since the post-Covid surge in Samvat 2077, when it soared by 38 per cent.
These gains reflect investor confidence and the market’s ability to recover from fluctuations, showcasing the overall strength of bluechip stocks in the current economic landscape.
This year’s rally in the Nifty 50 follows a period of modest returns in the previous two Samvat years, with gains of 10.5 per cent and 9.4 per cent in Samvat 2079 and 2078, respectively.
The robust performance in Samvat 2080 has been broad-based, with the Nifty Midcap 100 and Nifty Smallcap 100 indices each gaining over 37 per cent.
Nifty ended Thursday’s session at 24,205, a decline of 136 points.
Meanwhile, the BSE Sensex tumbled 553 points, or 0.69 per cent, to settle at 79,389.06.
While India’s equity markets have shown solid performance, they ranked in the middle compared to global peers, with the US markets (S&P 500 and Nasdaq), Germany’s DAX, and Taiwan leading the pack.
However, India has outperformed many emerging markets and Asian counterparts, such as China, Japan, Brazil, Thailand, and Indonesia, highlighting its relative strength in the region.
“We had three years of strong economic growth post-Covid, which converted to strong corporate earnings growth and strong equity market returns. There was a synchronised global rally after the Covid stimulus, and most markets, barring China — which had its own structural problems — have done well,” said Saurabh Mukherjea, founder and chief investment officer of Marcellus Investment Managers.
Strong domestic liquidity and foreign flows underpinned this year’s gains until the recent $10 billion pullout by foreign portfolio investors (FPIs).
The sharp pullback from FPIs over the past month saw the domestic markets give up a fourth of the gains made during the year.
The sustained weakness in China’s markets prompted several foreign funds to pivot to India, the only other major market in the emerging market (EM) pack.
“For domestic investors, it was a discovery of a new asset class for them after the pandemic. The average office goer has come to markets directly or through mutual funds. This structural change is well entrenched in the markets and capable of absorbing large outflows,” said UR Bhat, co-founder of Alphaniti Fintech.
Samvat 2080 was also punctuated with turbulence amid headwinds such as uncertainty about the rate hikes in the US, geopolitical tensions, and concerns over Yen carry trade reversals.
More recently, the resurgence in China, following government measures to revive its economy and equity markets, dimmed some appeal for domestic equities.
Furthermore, slowing earnings growth in India also acted as a major headwind This has prompted FPIs to book profits in India to cash in on the growth of much cheaper Chinese equity markets.
However, strong domestic support is helping Indian markets withstand the selling pressure.
“The economic cycle has softened, and we will likely get a few quarters of soft earnings growth. It will have a moderating effect on the stock market,” said Mukherjea.
During the early part of Samvat 2080, strong corporate earnings growth and political stability added to the lure for Indian equities.
Last November, the ruling Bharatiya Janata Party (BJP) won three of the four key state elections, which paved the way for hopes of the continuation of a single-party majority government at the Centre.
During the General Elections in May, though the BJP could not get a majority, it quickly cobbled a coalition and formed the government.
After the initial disappointment over the election results, markets returned and continued their upward trajectory.
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