The Indian stock market is experiencing a strong bull run with both benchmark indices Sensex and Nifty 50 hitting consecutive record highs.
Other than it being the last trading day of 2023, December 29 also marks the start of the January F&O series. The year 2023 unfolded as an intriguing period, not only for the Indian equity market but also on the global markets’ front. While 2023 started on a challenging note with restrained expectations and notable volatility in the initial months, the Indian market witnessed a remarkable recovery in the second half from its March 2023 bottom.
This bullish momentum is attributed to investors exhibiting a heightened risk appetite, propelled by robust domestic economic growth and optimism surrounding anticipated global interest rate reductions in the upcoming year.
The year 2023 is characterized by robust returns in the domestic equity market, albeit with intermittent bouts of volatility. The benchmark Nifty 50 has surged by nearly 20%, while the Sensex has yielded returns exceeding 18% so far this year. Notably, the overall market capitalization of all companies listed on the BSE has surpassed ₹366 lakh crore, underscoring the significant growth and value within the market.
December 2023 has emerged as the best month in terms of returns for the Indian market. The Nifty 50 has recorded a remarkable surge of over 7% within the month, constituting the most substantial monthly rally observed throughout the year. This was followed by more than 5.5% gains in the month of November.
Sunil Nyati, Managing Director, Swastika Investmart Ltd., said: “Despite a turbulent start in 2023, plagued by inflation anxieties, interest rate jitters, and murmurs of a global recession, the Indian market defied all expectations and is poised to finish the year with a resounding victory. While the Adani saga and the Israel-Palestine conflict threw temporary wrenches in its progress, the market navigated these challenges with remarkable maturity, showcasing its inherent resilience. Throughout most of the year, mid-cap and small-cap stocks dominated the headlines, fueled by robust macroeconomic fundamentals and ample domestic liquidity. However, the final two months witnessed a dramatic shift, with large-cap indices stealing the limelight. This surge can be attributed to a confluence of factors: the impending elections fostering political stability, promising whispers of rate cuts in 2024, and a much-needed decline in energy prices, finally enticing foreign investors back into the fold. This influx of foreign capital propelled large-cap indices to new record highs. While the overall market outlook remains bullish, history whispers of potential January blues. Statistically, January has often been a weak month, marked by consolidation or profit booking. However, the current pre-election euphoria is strong enough to potentially propel Nifty towards the 23000 mark before the general election. Even if a dip does occur, support seems robust around the 20500 level, acting as a potential floor during any market corrections.”
Let’s do a quick recap of the best and worst part of 2023 for Indian equity investors:
Returns in 2023
Nifty 50 index delivered nearly 20% returns, while BSE Sensex surged more than 18% in 2023 so far.
Broader markets outperformed the frontliners by a heavy margin as the Nifty Smallcap 100 index surged 54%, while the Nifty Midcap 100 jumped over 44% in 2023.
India’s Market Capitalisation At $4 Trillion
India’s market capitalisation crossed the $4 trillion mark. The Indian stock market is ranked fourth in the world in terms of market capitalisation, following the United States, China and Japan.
Adani-Hindenburg fiasco
The Adani Group, found itself in muddy waters following allegations of fraud by US-based short-seller Hindenburg Research. Shares of its group companies went into free fall in January after the short seller’s report alleged improper use of tax havens and concerns over its debt levels. The conglomerate has denied any wrongdoing.
However, Adani made the most of the crisis. To shore up investor confidence, it welcomed investors such as GQG and Abu Dhabi conglomerate International Holding into some of its companies, helping to dilute the family’s tight shareholding.
RBI’s April 2023 policy
In its April 2023 policy, the Reserve Bank India had paused its rate hike cycle after raising the key lending rate for six consecutive times since May last year.
HDFC Ltd-HDFC Bank merger
The country’s largest private lender HDFC Bank has completed its merger with Housing Development Finance Corporation, India’s biggest mortgage lender, in a deal that pits the new entity against the world’s largest banks. The merger took effect on July 1, 2023, following shareholder and regulatory approvals.
RIL-Jio Financial demerger
As part of its group restructuring, Reliance Industries had announced the demerger of its financial services business into Reliance Strategic Investments. The spun-off entity has been renamed Jio Financial Services, which has seen an implied price of ₹261.85 per share.
IPOs
2023 has been the year of the IPO. The total number of IPOs this year crossed last year’s tally, with 173 small and medium-sized enterprises (SMEs) and 56 mainboard listings to date. 2022 had a total of 40 companies hitting the primary markets and making their debut on the Street.
Also, with effect from December 1, capital markets regulator SEBI reduced the listing timeline for all IPOs to T+2 days, making the process among the fastest in the world.
FII flows
Investors, both domestic and foreign, have actively demonstrated confidence in India’s long-term growth narrative. So far this fiscal, DIIs and FIIs have invested $12 billion and $23 billion, respectively, in the Indian equity market till December 22, 2023. After being net sellers in FY22 and FY23, FIIs regained confidence in FY24 and the sentiment was further reinforced by the BJP’s big-bang performance in the Assembly elections across three key states out of the four in the fray.
T+1 settlement cycle
After China, India became the second country in the world to start the ‘trade-plus-one’ (T+1) settlement cycle in top listed securities on January 27. The T+1 settlement cycle means that trade-related settlements must be done within a day, or 24 hours, of the completion of a transaction.
Adani Enterprises cancels FPO
Adani Enterprises Ltd unexpectedly called off its ₹20,000-crore follow-on public offer (FPO), a day after the company closed the offer successfully. The decision followed a huge decline in its shares that resulted in the stock trading below the lower end of the FPO price band. The company said it will return the money collected from investors in the FPO.
US banking crisis
The back-to-back collapses of Silicon Valley Bank (SVB) and Signature Bank early this year, followed by First Republic Bank in May, roiled global markets, leaving billions of dollars belonging to companies and investors stranded.
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