In the last 10 years or so, the Sensex has touched the 80,000-level from the 25,000 level due to political stability despite global upheavals
Riding on political stability, overall economic growth, robust fiscal discipline and strong fundamentals, the Indian stock markets have come a long way in the last decade or so — from 25,000 in 2014 to 80,000 in 2024.
The Indian benchmark indices remain more resilient amid the US economic slowdown, according to global brokerages, as the risk of a US economic downturn has now risen materially. India has unambiguously healthy demand for equity in light of private equity's monumental pipeline of investments.
Today, India is the best-performing stock market among the top five globally, and delivered over 25 per cent return (in terms of market cap) from the beginning of 2024. Due to a stellar rally, the total market cap of the Bombay Stock Exchange (BSE) reached Rs 462 lakh crore (over 5.5 trillion dollars).
The market capitalisation of the Indian stock market crossed one trillion dollars for the first time on May 28, 2007. After the next 10 years, it reached 2 trillion dollars on July 10, 2017, and after the next four years it reached 3 trillion dollars on May 24, 2021, and then after more than two years, it reached 4 trillion dollars on November 30, 2023, and in the next six months, the 5 trillion dollars mark was crossed on May 24, 2024.
The meteoric rise in the Indian stock market is due to the strong performance of the GDP. In the financial year 2023-24, GDP grew at the rate of 8.2 percent and the Economic Survey reported that GDP may grow at the rate of 7 per cent in the financial year 2024-25.
The unique registered investor base on the National Stock Exchange (NSE) has crossed the 10-crore mark for the first time. The total number of client codes (accounts) registered with the leading exchange stands at 19 crore.
According to the exchange, the benchmark Nifty 50 index has generated a return of 11.8 per cent in this fiscal year (as of July 31). The Nifty 500 index has delivered a strong 16.2 percent gain during the same period. As many as 2,535 companies from various sectors are listed on the NSE with a market capitalisation of Rs 455.79 lakh crore (as on July 30).
Mutual funds, SIPs at record levels
As the financial landscape in India witnesses a significant shift, the mutual fund ecosystem has played a crucial role in this transformation, stepping up remarkably to earn the trust of Indian investors.
India’s mutual fund industry witnessed the highest ever Rs 23,332 crore SIP inflow in July this year, which in June was Rs 21,262 crore. Due to the recent increase in Systematic Investment Plans (SIPs) inflow, Assets Under Management (AUM) of the total mutual fund industry reached 64.69 lakh crore in July as against 60.89 lakh crore in June.
According to the AMFI (Association of Mutual Funds in India) data, total inflows into equity funds declined by 8.6 per cent to Rs 37,113.4 crore in the last month which was Rs 40,608.19 crore in June, the highest ever recorded equity inflow in mutual funds in India. This is the 41st consecutive month that inflows into open-ended equity funds have been positive. In July, Sensex surged 3.43 per cent and Nifty railed 3.92 per cent.
Venkat Chalasani, Chief Executive of AMFI, said that the growth rate of the industry is positive due to continuous investment in mutual funds by retail investors. At present, mutual funds have become an important part of the financial strategy of retail investors. Maximum investment is being seen in sectoral and thematic funds. A net investment of Rs 18,386.35 crore came in this category in July.
FPIs pumped in Rs 54,727 core in equity and debt in the full month of July. According to the NSDL data, FPIs invested Rs 32,364 crore in equity and Rs 22,363 crore in debt in July. FPI activities are influenced by factors like the performance of the global equity markets, the movement of the dollar index, incremental geopolitical events, and opportunities in the Indian markets considering slightly elevated valuation levels.
Domestic investors stabilise volatility
As foreign institutional investors (FIIs) resorted to big selling in the cash market this week amid weak global cues, domestic institutional investors (DIIs) are playing a stabilising role in mitigating volatility and supporting market confidence.
Additionally, the increasing participation of domestic retail investors through mutual funds strengthened the market's internal support system, fostering a more stable investment environment, said Alok Agarwal, Head, Quant and Fund Manager, Alchemy Capital Management.
Since the end of 2020, FIIs have net bought equity worth Rs 1 trillion compared to mutual funds, which have bought Rs 6.2 trillion. With six times more net buying, domestic institutions are becoming far more relevant in the last few years. According to experts, the domestic funds are bullish on the Indian markets due to several factors.
According to Sunil Damania, Chief Investment Officer, MojoPMS, despite global negative news, the Indian stock market has demonstrated remarkable resilience. Unlike previous trends, retail investors are now using market dips as opportunities to increase their equity allocations.
Foreign Portfolio Investors (FPIs) typically pursue valuations. Currently, India’s valuations are at a premium compared to the historical premiums of other emerging markets. “Last year, the Indian market saw record inflows from FPIs, leading to expectations of muted inflows this year. The average monthly inflows from FPIs in 2024 were Rs 15,000 crore, which has come down to Rs 4,000 crore year-to-date in 2024,” Damania added.
Domestic funds have greater confidence in the long-term growth story of India, driven by sectors like manufacturing, pharmaceuticals, and renewable energy. The growing financial literacy and an increasing investment culture among Indians have boosted fund inflows, further fuelling market optimism.
“India is a unique large country with stability in government along with double-digit economic growth, double-digit corporate earnings growth and double-digit corporate return on equity (ROE). FIIs can’t remain out for a long period of time,” the experts maintained.
(Photo courtesy: wikipedia/BSEIndia)
As more and more Indians prefer to have simple and transparent exposures in mutual funds, the total retail folios in index funds increased by nearly 12 times from 4.95 lakh in March 2020 to 59.37 lakh in December 2023, a study by Zerodha Fund House showed.
The total number of index funds has increased from 44 in March 2021 to 207 in March 2024, accounting for an absolute growth of 370 per cent. As of March 31, there were 120 and 87 equity and debt index funds, respectively.
