Underperforming sectors from past decade led 2023 markets rally
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The recovery of underperforming sectors from the past decade -- such as Real Estate, Capital Goods, PSUs, Industrials, Defence -- led the markets rally in 2023, as per a report by Motilal Oswal Financial Services.
The top gainers in the sectoral space were: Real Estate (+81 per cent), Capital Goods (+67 per cent), Auto (+48 per cent), Infra (+39 per cent), Healthcare (+34 per cent), Utilities (+33 per cent), PSU Bank (+32 per cent), Energy (+29 per cent), FMCG (+29 per cent), Technology (+24 per cent) & Metals (+19 per cent).
CY23 witnessed broad-based growth with all indices and sectors delivering positive returns. Both the Nifty Midcap 100 (+47 per cent YoY) and Nifty Smallcap 100 (+56 per cent YoY) outperformed the Nifty-50 by a wide margin of 27 per cent and 36 per cent, respectively.
On a five-year basis, Nifty-50/Nifty Midcap100/ Nifty Smallcap100 reported a CAGR 15 per cent/21 per cent/19 per cent.
India ended the eventful CY23 on a high note, with the Nifty delivering 20 per cent returns, marking the eighth consecutive year of a positive close. The expectations of the peaking of rate hike cycle, moderating inflation, improving liquidity, and consistently rising retail participation in equities, along with strong corporate earnings, drove this performance.
The resounding victory of BJP in the three key state elections in December 2023 added to the positive sentiments as it further strengthened the expectation of political continuity after the general elections in April/May this year. Even over the long term, India continues to be one of the top-performing markets with a 3-/5-/10-year return CAGR of 16 per cent/ 15 per cent/13 per cent (in local currency terms) and a CAGR of 11 per cent/11 per cent/10 per cent (in USD terms), the report said.
The highlight of CY23 for Indian markets was the sharp outperformance of mid- and small-cap stocks. The Nifty Midcap 100 (up 47 per cent YoY) and the Nifty Smallcap 100 index (up 56 per cent YoY) outperformed the Nifty by a wide margin in CY23.
Even as FII flows turned around in CY23 ($21b of inflows in CY23 vs. $17b of outflows in CY22), the domestic flows remained resilient with $22b of inflows (+$32b in CY22) amidst hectic primary and secondary market activities.
