The 30-stock Sensex ended FY23 with a net gain of 0.7% after notching double-digit gains in FY22.
For markets, FY23 began on a tough note as Russia’s invasion of Ukraine pushed commodity prices higher, resulting in an unprecedented rise in inflation in world economies, including India.
This put a plug on the easy liquidity, as central banks were forced to raise interest rates to rein in inflation.
The US Federal Reserve raised interest rates by a whopping 450 basis points, while the Reserve Bank of India increased rates by a cumulative 250 bps in the current financial year.
Despite these headwinds, Indian equities managed the gains in FY23, primarily because of the backing of domestic institutional investors.
DIIs were the saving grace as they net bought a record Rs 2.53 lakh crore worth of shares in FY23. Meanwhile, foreign institutional investors were net sellers of Indian equities for the second consecutive financial year. They net sold shares worth Rs 40,413 crore in FY23.However, the amount is far less than the Rs 1.4 lakh crore worth of selling done by them in FY22.
Index Stocks
Even though FY23 was a tough year to make money, investors managed to get lucky across the largecap, midcap, and smallcap segments.
The gainers outnumbered the laggards on Sensex in FY23. Ten stocks, including ITC, Mahindra & Mahindra, NTPC, Hindustan Unilever, Larsen & Toubro, ICICI Bank, UltraTech Cement, IndusInd Bank, Nestle India, and Axis Bank gave double-digit returns.
Meanwhile, Asian Paints, Reliance Industries, Tata Consultancy Services, Tata Steel, Bajaj Finance, Infosys, Bajaj Finserv, Tech Mahindra, and Wipro registered double-digit losses.
Broader Market
Stocks in the midcap and smallcap segments, too, fell prey to the overall sour mood in the market. However, several stocks managed to shine and even make investors wealthy.
One midcap stock and 33 smallcap stocks turned multibaggers in FY23. These include names like Varun Beverages, Mahindra CIE Automotive, UCO Bank, Titagarh Wagons, Rail Vikas Nigam, Ujjivan Financial Services, Mazagon Dock Shipbuilders, Karnataka Bank, among others.
There were several laggards also in the segment, as investors booked profits amid an uncertain global environment.
In the smallcap segment, 63 stocks fell more than 50% in FY23, while in the midcap segment, 23 stocks shed more than 25%.
Year Ahead
As uncertainties on the global front persist, and risks pertaining to inflation are far from over, market experts believe that the first half of FY24 is likely to remain volatile.
Nevertheless, they do see FIIs making a big comeback to India in FY24 as the domestic growth story remains promising when compared to other emerging markets.
Further, the recent correction in the market has turned valuations a bit attractive, making a case for long-term investors to re-enter the market.
“Valuation has come off substantially from 24x 1-year forward P/E in Oct’ 21 to 17x currently (v/s 20x long period average), offering a moderate margin of safety,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.
In FY24, Khemka expects strong earnings growth of around 15%, largely because of improving margins as raw material prices cool off.
(Data inputs from Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
