In 2023, the Indian stock market initially faced a downtrend but later experienced a significant rally, with Nifty achieving an year-to-date return of +18%. Mid and small-cap stocks outperformed, yielding returns of +40% and +50%, respectively. The market witnessed the launch of 57 mainboard IPOs, and certain sectors, including defence, realty, autos, PSEs, and pharma, stood out as major performers, while new-age businesses presented a mixed picture.
On the domestic front, India became the fifth-largest economy globally and the fastest-growing, despite concerns about recessionary pressures in other developed economies. The Reserve Bank of India raised its repo rate to 6.5% in February but later paused its stance to strike a balance between inflation and growth rates. The Israel-Hamas war, though surprising, did not disrupt the market’s upward trend. Recent state assembly elections suggested a potential third term for the incumbent Modi government in the general elections, according to market perceptions.
Exiting 2023 on a positive note, the RBI increased its FY24 GDP guidance by 50 basis points to 7%, and the US Fed indicated at least three rate cuts in 2024. While the Indian general elections in May and the US Presidential elections in November may induce market volatility, a decline in oil prices and robust earnings potential for Indian companies contribute to a positive outlook for the market in 2024. Sectors like financials and IT, along with themes such as manufacturing, PSEs, and healthcare, are anticipated to be rewarding during the upcoming year.
Let’s understand what made 2023 unique in terms of investments in the equity market.
Anshul Arzare, MD and CEO, Yes Securities
In 2023, a paradigm shift in the equity market landscape has ushered in dynamic changes. In 2023, mid and small-cap stocks significantly outperformed the largecaps, which is indicative of the country’s thriving business environment and also signals that there are ample opportunities available around new business activities and models. New trends are emerging creating a fresh demand across activities that were non-existent earlier.
Additionally, there was a substantial formalisation of the economy, resulting in heightened market involvement and mobilisation of assets into the market. Furthermore, there was a revival in public capital expenditure, resulting in a notable market rally.
Companies with a history of underperformance for decades have observed a surge of 1x-2x due to the ongoing public capital expenditure trend in the country. High-frequency indicators, showcasing strong credit growth and increased demand for automobiles and power, signify an augmented purchasing power within Indian households.
Hemang Kapasi, Director, Fund Manager & Principal Officer – PMS at Sanctum Wealth
This rally caught most investors by surprise. What was even more surprising was the bull market in public sector undertakings. It has been an exceptional year for them whose combined market capitalisation has exceeded ~INR 50 lakh crore for the first time.
All this happened at a time when investors were worried about recession fears in the developed world and interest rates continued to go up. This signifies the rotational nature of the market. At a time when consumption was slow, the industrials and PSUs took the baton and gave phenomenal returns.
Another thing unique about the year was that the value stocks were back in focus after a long time. The kind of broad-based moves that we saw in value stocks in 2023 weren’t seen in the last couple of decades. Most of the credit of this rally goes to the domestic funds and HNIs, which were backed by unabated retail flow with the SIP book breaching all records and clocking the highest-ever monthly flow of ₹17,000 crores.
Neeraj Chadawar, Head – Fundamental and Quantitative Research, Axis Securities
The year 2023 proved to be an intriguing one for the Indian equity market, characterised by notable volatility in the first half led by the Hawkish central bank, rising bond yields, and other macroeconomic challenges.
These occurrences collectively subdued market performance in the first half of Samvat. However, in the second half, the Indian market remarkably recovered from its Mar ’23 bottom.
This rally further strengthened during December 2023 after the three back-to-back events turned in favour of the equity market such as the results of the assembly elections in three out of five key states have raised the expectations of policy continuity in 2024, boosting the market confidence, the status quo maintained by the RBI, with a positive revision in FY24 GDP from 6.5% to 7 % and the dovish narrative from the US FED in the FOMC meeting.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decision.
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