Reflections of 2023

 We had made an YouTube Video on "Roller Coster Ride" on 15th may 2022 - explaining the underlying opportunities in the then lackluster markets. Indeed it was a timely video showcasing the merits of investing.

Infact, it could be interesting to watch this video again and see what we said then:

https://www.youtube.com/watch?v=iNHnDNswCzg

While many of us are rejoicing the market rally, and many think the turning point for markets has been the state election results on November 2023, markets showed signs of growth way back in May 2023 itself - exactly one year after we posted the above mentioned video.

Since FII's were net sellers since october 2021, it was the Mid and Small caps which were ruling the roost till Nov 2023. The state election results gave clarity on upcoming elections and FII's joined the bandwagon to pump in record money in the last two months of 2023. 

In Nifty 50 stocks, 48 ended the year positively. And large cap index gained 20% in 2023. 

But the real winners in 2023 has been Mid and Small Caps - which gained 44% and 49% respectively. 

The Midcap 100 index surged 46%, driven by REC Ltd. and Power Finance Corp., which gained 3.5 and 3.4 times, respectively. Mazagon Dock Shipbuilders Ltd. witnessed a near threefold increase in its share price, led by the push for indigenous defence production. Of the Midcap 100 pack, 93 stocks ended in the positive. Aditya Birla Fashion and Retail Ltd., ACC Ltd., and Page Industries Ltd. were the top laggards and experienced declines of 22.5% and 10%, respectively.

The Smallcap 250 rose by 49% in 2023. BSE Ltd., with fourfold gains, emerged as the top performer in the pack. Suzlon Energy Ltd. saw a 3.6-fold increase, capitalising on the thrust for renewable energy. Campus Activewear Ltd. and Easy Trip Planners Ltd. faced challenges. 

Sectorwise, 

• Nifty Realty led with an 81% surge, driven by Prestige Estates Projects Ltd., DLF Ltd., and Brigade Enterprises Ltd. 
• Nifty Auto and Nifty Pharma also performed well, growing by over 47% and 32%, respectively. 
• The auto sector gained due to steady demand, a softening of commodity prices and favourable policy changes this year. 
• However, sectors like Nifty Bank, Nifty Oil and Gas, and Nifty Financial Services experienced more modest gains of 11%, 12%, and 12%, respectively.

IPO Market:

A vibrant IPO market is curcial for a healthy secondary market. 2023 will certainly be remembered as the year of the primary markets. And more infamously, IPOs in the SME space. Out of over 150 companies that hit the primary markets in the SME space, 51 companies hit subscription levels of over 100 times and 12 of those hit subscription levels of over 300 times! A logistics company received subscription for Rs 10,100 crore against the IPO size of Rs 32 crore. Another SME IPO received Rs 18,800 crore worth of bids against an IPO size of Rs 78 crore. And the most subscribed IPOs were not oversubscribed 'merely' 100-200 times. Kahan Packaging was subscribed 730 times. Speaks of the mania in the markets in 2023. 

Going Forward...

FII's have just resumed their investments. And you have a BIG event in 2024 - Central Government elections in May 2024. Markets are running up on expectations. But investors need to keep in mind the following:

• Investments made when past year(s) returns have been muted - gives Best returns.
• Last year has been spectacular. Expecting similar kind of returns in 2024 may be tough.
• Run up to the elections is usually noisy. That can create lots of volatality.
• Cut in interest rates is widely expected in 2024. If that happens - that can fan liquidity and fuel inflation too. It can pump up stock price.
• Above all - a run up in stock price (hence MF's NAV) has to be substantiated by rise in earnings. It is ultimately the fundamentals which justify / determine the stock price.
• Having said that - while one year forward may be tough to predict, over next 3 to 5 years Indian economy is bound to do well. 
• So Investors who need funds in next 1 years needs to be cautious. All others can invest at every opportunity you may get in the markets.
• But it FII's continue to invest - 2024 could be an year for Large cap's. 

So multitude of factors - election results + Interest rate cut + FII Investment + Earnings Growth justification - are likely to dictate 2024. Asusual - it is Interesting times ahead...