India's Nifty 50 and Sensex on Track to Outperform Global Indexes in 2024 and Beyond
By Bharath Rajeswaran
BENGALURU (Multibagger) - India's NSE Nifty 50 and S&P are on the path to outshine Wall Street's Nasdaq and S&P as top-performing indexes this year, with analysts predicting the rally to continue into 2025.
In 2024, the Nifty and Sensex have surged by 18.7% and 17% respectively, securing the third and fourth positions among major global bourses.
The Nasdaq and S&P have seen gains of around 22% and 20.5%, slightly ahead of the Indian benchmarks. Japan's Nikkei 225 and FTSE 100 follow India, rising by 13% and 12% respectively.
Recently, India's weightage in a key MSCI index surpassed that of China for the first time.
"We expect the Fed rate cut to boost foreign inflows and generate enough momentum in domestic markets to shield against downturns," analysts at Emkay Global stated in a report.
The stock market rally in India, driven by expectations of policy continuity post the national elections in June and a strong growth outlook, gained further momentum after the U.S. Federal Reserve's significant rate cut on Sept. 18.
Foreign portfolio inflows, which had slowed down in August, are set to reach a six-month high in September.
The rally has propelled the 12-month forward price-to-earnings ratios of the Sensex and Nifty to 23.6 and 24.4 respectively—the highest among emerging markets. Technical indicators indicate that both indexes are currently in overbought territory.
Anticipations of a soft landing for the U.S. economy are likely to boost sectors like information technology and pharmaceuticals, which derive a significant portion of their revenue from the U.S., according to analysts.
Real estate, automotive, public sector enterprises, pharmaceuticals, and energy are among the top-performing sectoral indices so far this year.
Domestic institutional and retail investors have also contributed to the stock market by buying into all dips.
Domestic institutional investors have acquired shares worth a net of 3.23 trillion rupees since the beginning of the year, based on provisional data from the National Stock Exchange.
Mutual funds have also been net buyers since February 2021, with contributions through systematic investment plans reaching record highs for 14 consecutive months.
However, there are concerns raised by analysts at Jefferies, who state that the combined domestic inflows through mutual funds, direct participation, insurance, and pension funds are "unsustainably high" at $7.5 billion per month between January and August.
The brokerage firm maintains a near-term cautious view on markets, particularly small- and mid-cap stocks.
Analysis: The Indian stock market is experiencing a significant rally in 2024, with the Nifty 50 and Sensex outperforming major global indexes. This trend is driven by factors such as policy continuity, strong growth outlook, and foreign inflows. Investors can consider sectors like information technology and pharmaceuticals for potential growth opportunities. However, caution is advised due to concerns about high domestic inflows and overbought market conditions.