House View: Global turbulence, economic resilience, and strong market rebound

Indian Equity markets were driven by liquidity in the form of strong flows from FIIs and DIIs to the tune of USD 21.4 Bn and USD 22.3 bn respectively. The real price action was in the mid and small cap space due to strong retail flows. The mutual funds received INR 185 bn in Q4 CY23 in small and midcap funds vs an inflow of INR 58.5 bn in large and flexi cap funds. The rally in the small and mid-cap space has outpaced the change in earnings growth, raising concerns about their valuations. The base case in 2024 is to see a “soft landing” in the developed world. As per World Bank, the world economic growth could be at 2.4%, slower than that of 2.6% in 2023. Central Banks led by US Fed may start to cut interest rates as early as Q2 CY2024. India may also see GDP slow down to 6.5% in FY25 from 7% in FY24.

Highlights
 

• Most markets bounced back in 2023. The Developed Market Equity Index had a stellar run rising 22% for the year vs falling 19% in 2022. While Emerging Markets Equity Index was up only 7% for the year, it rebounded from the fall of 22% in 2022. The Indian Equities outperformed their Emerging market peers with Nifty 50 rising 19%.
• Indian Equity markets were driven by liquidity in the form of strong flows from FIIs and DIIs to the tune of USD 21.4 Bn and USD 22.3 bn respectively. The real price action was in the mid and small cap space due to strong retail flows. The mutual funds received INR 185 bn in Q4 CY23 in small and midcap funds vs an inflow of INR 58.5 bn in large and flexi cap funds.
• The base case in 2024 is to see a “soft landing” in the developed world. As per World Bank, the world economic growth could be at 2.4%, slower than that of 2.6% in 2023. Central Banks led by US Fed may start to cut interest rates as early as Q2 CY2024.
• This is the first time since inception that Nifty 50 has seen eight consecutive years of positive returns in INR terms. No other major equity index in the world barring Nasdaq 100 has enjoyed a longer run of eight consecutive years of positive returns
• India remains a hunting ground for multi baggers. As on 31st December 2023, there were 348 companies across 100 Industries have been 10 baggers in the last 10 years. Over the last three years, Indian has seen 278 ten-baggers across 88 industries.