Indian benchmarks blazed to record highs in the first few months of 2024 but slowing corporate earnings and an exodus of foreign funds curtailed their annual gains to about 8.5%, the least among major global peers, and even pushed stocks into correction territory.
The Nifty 50 (.NSEI) and Sensex (.BSESN) rose 8.8% and 8.2%, respectively, this year, logging their ninth straight year of gains, mostly on support from domestic institutional investors and policy continuity after India's ruling party returned to power.
The benchmarks rose about 21% each to hit record highs on Sept. 27. They slipped into correction territory - a 10% drop from all-time high levels - in November, hurt by record monthly foreign selling in October and a moderation in earnings growth.
The blue-chips are still in correction territory.
This decline resulted in the benchmarks underperforming the Nasdaq Composite (.IXIC), Dow Jones Industrial Average (.DJI), S&P 500 (.SPX), Nikkei 225 (.N225) and Shanghai Composite (.SSEC), which advanced 12%-32% this year.
However, inflows into equity mutual funds more than doubled year-on-year to a record high of 3.53 trillion rupees ($41.23 billion), cushioning some of the volatility in foreign flows.
Foreign portfolio investors (FPI) remained net buyers for the year as of Dec. 30, adding stocks worth 20.26 billion rupees.
Lofty stock valuations, earnings pressures and macroeconomic challenges resulted in domestic equities underperforming some global markets, said Nikhil Rungta, chief investment officer of equity at LIC Mutual Fund AMC.
The smallcaps (.NIFSMCP100) and midcaps (.NIFMDCP100) gained about 24% each in 2024, outperforming the benchmarks for the second straight year as domestic investors and mutual funds piled on due to the return potential in these segments.
"From here on, action in small and midcaps will get very stock-specific, dictated by earnings over the next two quarters, which will have to justify lofty valuations," said Krishna Appala, senior research analyst at Capitalmind Research.
The Federal Reserve's outlook for fewer interest rate cuts, which could trigger further foreign outflows from developing countries including India, and U.S. President-elect Donald Trump's proposed policies will be major factors for emerging markets in 2025, according to analysts.
Among stocks, Reliance Industries (RELI.NS), the second-heaviest stock in the benchmark indexes, dropped 6%, posting its worst year since 2011 on weaker earnings in the last two quarters.
Asian Paints (ASPN.NS) lost about 33%, its worst ever annual performance, hurt by weak earnings and rising competition.
Among sectors, the pharma index (.NIPHARM) was the top sectoral performer, jumping 39%, aided by steady sales growth in domestic and U.S. markets as well as stable pricing in the U.S.
($1 = 85.6150 Indian rupees)
