In what could have been a remarkable year for India’s equity market, relentless selling by foreign institutional investors (FIIs), coupled with a weakening rupee and several geopolitical developments, dampened market sentiment and curtailed investor optimism from record highs.
After rallying nearly 19% between the start of the year and September 25, the benchmark indices – BSE Sensex and NSE Nifty50 – closed 2024 with moderate gains of 8-9% each. Over the last three months of the calendar year, both indices corrected by approximately 10%.
The Sensex fell 109 points or 0.14% on the last session of CY24 (31 December 2024) to settle at 78,139. During the year, it gained 8.18% and hit a high of 85,978. The Nifty ended the year at 23,658. It advanced 8.76% in 2024 and reached a peak of 26,277. It is the ninth straight year that the two indices closed in green.
The broader market outperformed the benchmarks with the Nifty Midcap and Smallcap indices delivering gains of over 20% each. Among sectoral indices, real estate, pharma, and healthcare led the rally by gaining between 33% and 41%. Nifty Media struggled the most and fell 25% in 2024.
Among Nifty50 stocks, Tata Group’s Trent, Mahindra & Mahindra and Bharti Airtel had a stellar run. Hit by rising competition Asian Paints and IndusInd Bank fell sharply.
While the market remained resilient to worsening geopolitical tensions, especially in the Middle East, and quickly absorbed the general election result outcome during the first 9 months, investors’ confidence took a hit after corporate earnings growth slowed down in Q2FY25.
Further, a win by Republican candidate Donald Trump in the US Presidential election, its impact on the bond and currency market, and the US Fed’s decision to go for fewer rate cuts in 2025 become way too much for the expensive Indian market to sustain its valuation.
Going forward, the first few months of 2025 are expected to remain volatile. Trump's taking over the chair and its implications for international trade will guide the global markets. The Union Budget and the Q3 earnings will also influence the market’s trajectory in the near term.
Mohit Batra, Founder, MarketsMojo said that slowing economic momentum poses risks to corporate earnings growth. “If these economic headwinds persist, sustaining current high valuations could be challenging. Geopolitical uncertainties, including potential policy shifts in the US, may also weigh on market sentiment. Given these factors, we expect the market in 2025 to be more stock-specific, with selective sectors driving performance rather than a broad-based rally. Investors should prepare for a more challenging environment compared to the relatively straightforward gains of 2024,” added Batra.
However, Deepak Ramaraju, Senior Fund Manager at Shriram AMC feels that the stock market in 2025 is set to ride on strong economic growth and government efforts to boost infrastructure and digital innovation.
“Sectors like capital goods, technology, financial services, consumption, and healthcare are expected to shine, with emerging areas such as semiconductors, electronic and manufacturing, renewable energy and electric mobility grabbing more attention,” said Ramaraju.