The highest-ever institutional flow into the Indian capital market was recorded in FY24. The inflow from both Domestic Institutional Investors and Foreign Institutional Investors stood at approx. $50.5 billion or ₹4.19 lakh crore in FY24, assuming $1 equivalent to ₹83, as per a recent research report by Motilal Oswal.
Indian Capital markets signed off FY24 with stellar returns, 29% in Nifty, 60% in Nifty Midcap 100, and 70 % in Nifty Smallcap 100. India’s market cap reached $4.4 trillion, making it the fifth largest in the world. During FY20-24, the Nifty profit pool has expanded from ₹3.5 lakh crore to ₹7.7 lakh crore in FY24, representing a compounding of 22%.
The Indian market has witnessed an addition of over 3.6 million Demat accounts per month from October 2023 to March 2024. The rise in the financialisation of savings coupled with the surge of domestic investors has not only insulated the markets in the face of global volatility but also has been pivotal to the massive inflow of funds due to the intensified SIP contributions.
Cumulative domestic equity inflows have amounted to $92.7 billion over the last five years and India Inc., has raised $92.9 billion through primary markets over the last five years. From a meagre 3.6 crore in March 2019, Demat accounts in India have surged to 15.1 crore in March 2024. India now boasts a unique combination of ‘size and growth’. India’s GDP is likely to exceed $4 trillion in FY25/26 and $8 trillion by FY34, says the report.
The current condition of the capital market is optimally poised for growth and investments. Or, as a report by Motilal Oswal puts it -- India is currently experiencing a mini-Goldilocks moment.
The promising point at which the market stands currently is owing to the solid macroeconomic conditions, healthy corporate earnings, peaking of interest rates, moderate inflation print, and ongoing policy momentum. The report states that its conviction on selected domestic cyclical themes, such as financialisation of savings, private capex revival, rising discretionary consumption, strengthening real estate cycle, and the massive development of digital and physical infrastructure, backs its sanguine outlook on the medium-term India story.
FY 24: THE YEAR OF MID AND SMALL CAPS
FY24 witnessed broad-based growth, with all indices and sectors delivering positive returns. The Nifty Midcap 100 (+60% YoY) and the Nifty Smallcap 100 (+70% YoY) outperformed the Nifty 50 by a wide margin of 31% and 41%, respectively. On a five-year basis, Nifty-50/Nifty Midcap 100/ Nifty Smallcap 100 reported a CAGR 14%/21%/18%.
The recovery in underperforming sectors of the past decade, such as real estate, capital goods, PSUs, industrials, defence, etc., (despite not being a major contributor to the large-cap indices), drove the rally in the broader markets. This propelled the mid-and small-cap indices to new highs.
Top sectoral gainers in FY24 were: real estate (+133%), PSU bank (+89%), capital goods (+77%), auto (+75%), energy (+71%), healthcare (+58%), metals (+50%), technology (+22%), FMCG (+18%), and private bank (+14%).
Top sectoral gainers in FY24 were: real estate (+133%), PSU bank (+89%), capital goods (+77%), auto (+75%), energy (+71%), healthcare (+58%), metals (+50%), technology (+22%), FMCG (+18%), and private bank (+14%).
Nifty-50 delivered a 26% earnings growth in 9MFY24. High-frequency data (GST collections, auto monthly numbers, power demand, PMI data, et al.) indicates that earnings momentum will continue to remain intact going forward as well, says the Motilal Oswal report. The sectors that underperformed on the earnings front for the past several years, such as automobiles, real estate, capital goods, infrastructure, industrials, utilities, hotels, and PSUs have also made a strong comeback in FY24. The pick-up in government capex and the growth in order books continue to boost sectors such as railways, defence, capital goods and utilities.
India is set to exit FY24 with a GDP of $3.6 trillion and an underlying growth of 7.6% plus, the report adds.
