After high-teen returns in 2023, what does the macro picture indicate for Nifty bulls in 2024?
Fed hiked interest rates by 5.5% — this, with “quantitative tightening program” of reduction in balance sheet, resulted in multi-decade high interest rates in the US and around the world.
As a result, the foreign portfolio investor (FPI) flows turned negative on emerging markets like India, leading to significant outflows and putting downward pressure on Indian equities at the start of the year. The year started with the persistence of inflation at elevated levels across economies, continuing geo-political uncertainties and tightening financial conditions.
The banking turmoil in US (Silicon Valley Bank) and Europe (Credit Suisse) increased risk aversion with the expectations of an early reversal of the monetary tightening cycle, leading to Equity markets to correct and softening of bond yields.
During the later part of the year the concerns of a significant growth slowdown softened, globally inflation started to moderate, most of the central banks took a pause on interest rate hike, boosted the positive sentiments among investors. With the brightening prospects of a “soft landing”, FPIs & DIIs have been a net buyer so far during the year, led to market rally and most of the tracked domestic indices trading at their all-time highs.
2023 has been a good year for Indian equity markets, with the Nifty50 on track to deliver around 20% gains.
The midcap & smallcap indices are on track to deliver substantially higher returns of around 50% for the year. The gains during the year have been fairly broad-based, with most sectors participating in the rally.
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