Despite a whirlwind of challenges, the stock markets proved unstoppable in Samvat 2080. Local investors showed unwavering confidence, defying every roadblock that came their way. With domestic earnings growth showing signs of slowing and valuations riding high, companies will need to bring their A-game. Growth is the magic word if they want to win investors' hearts—and wallets!
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Bullish local investors shrugged off all risks, including the highly anticipated tough election outcome for the BJP in 2024. Their mantra was simple: "Heads, I rise; tails, I rise." External noise from the Iran-Israel conflict, volatile crude, and the Chinese stimulus barely made a dent. Investors stayed strong, keeping the market party going!
Mid and small-caps continue to be frothy, and Nifty's P/E at 23.5, is above the historical averages, as the index has risen faster than growth in earnings. The Buffett Indicator is flashing bright red at 131.
Global inflation has eased, thanks to persistent efforts by central banks, leading to lower bond yields in major economies like the US, UK, India, and China. Countries such as India, the US, China, and Taiwan are projected to see stronger economic growth in 2024, with inflation expected to decline further over time.
Local investors are staying strong, and growing their influence. Foreign portfolio flows to emerging markets have continued to slow down due to China's underperformance and high U.S. yields, though India still sees positive flows. Key drivers ahead will be global rate cuts, China's stimulus, and India's earnings growth. Mutual fund flows, meanwhile, should keep markets supported.
Despite the volatility in PSU stocks, and a disappointing electoral verdict in June 2024, the Nifty PSE and CPSE indices ended up delivering impressive returns of 78% and 75% over the past year. Mid-caps and small-caps also continued to be in focus, although several prominent stocks have seen 30-40% corrections during the year.
Data Source: Ace Equity and Bloomberg.
