2023 in markets: A cheerful finish to a volatile year

The latter part of the year witnessed a remarkable shift in investor attitudes, pushing India's headline indices to new heights. (Image: Pixabay)
The latter part of the year witnessed a remarkable shift in investor attitudes, pushing India's headline indices to new heights. (Image: Pixabay)

Summary

  • It was a hushed start for equities this year with inflationary concerns and growth dynamics driving the markets but sentiments rebounded dramatically in the later half.

The year 2023 proved to be a roller coaster for Indian equities, as investors grappled with concerns like inflation, high interest rates, US treasury yields, and geopolitical issues. However, the latter part of the year witnessed a remarkable shift in investor attitudes, pushing headline indices to new heights. Amid a strong macroeconomic environment, the market outlook remains optimistic, although some apprehension may arise as the 2024 general elections approach. Mint delves into the key trends that shaped the stock market this year.

The report card

As the year draws to a close, the Indian stock market is on track to achieve double-digit growth for the eighth consecutive year. Boosted by a robust Q2 GDP report and a dovish statement from the Fed regarding rate hikes, investor sentiment has surged. The current rally has propelled India’s market capitalization past the $4-trillion mark, closing in on Hong Kong, the fourth-ranked market. Nonetheless, Indian markets continue to trade at a premium compared to some developed and emerging peers.

The big drivers

This year's impressive performance was influenced by the gradual return of foreign institutional investors (FIIs) who had withdrawn in September and October due to global uncertainties. FIIs infused 9,001 crore into Indian equities during November, followed by another 26,759 crore in December. Consequently, India remained one of the most favoured destinations of foreign portfolio investors (FPIs) this year. Meanwhile, domestic investors consistently supported the market. Notably, small- and mid-cap stocks significantly outperformed large-cap stocks. Though there are no immediate signs of a fatigue, historical trends suggest a potential underperformance after periods of high returns.

The P-E ratio of the small-cap index stands at 31.2x, exceeding the Sensex's 25.4.

New entrants

The primary markets, too, are back in action after a dull start to the year. In recent months, the number of initial public offers (IPOs) has surged remarkably and a booming IPO market is drawing investors to newly-listed stocks. The segment is expected to remain strong for now.

Planned IPOs worth 28,440 crore have received the regulator’s approval, and could see their listing in 2024, data from primedatabase.com shows.

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