India's 2024 Share Market Summarized: Know All Details

2024 will end with positive returns for investors. But it was a roller-coaster ride for investors. Nifty 50 made a lifetime high in September but corrected significantly on multiple occasions. Also, we saw the old heroes exiting the market and new ones taking the central stage. Let us look at how the share market turned for investors in 2024 and what the next years have in store for investors.

Understanding Exit of FIIs and Entry of Retail Investors

The Exit of Old Heroes

In the past, the Indian market was driven largely by Foreign Institutional Investors (FIIs). However, it has changed in recent years, and things changed drastically in 2024. The historical data suggest that when FIIs exited the Indian market, the market fell considerably.

However, this year was different. FIIs were net sellers in eight months, with the highest selling in October of Rs 1.14 lakh crore. Overall, in 2024, FIIs sold a net Rs 2.96 lakh crore - a record selling in a year.

*Data is as on 26^th Dec 2024

How did we end up with positive returns despite the massive selling by FIIs? It was because of the new heroes.

The New Heroes

The retail investors were a saviour for the market this year. Despite the selling by FIIs, the Nifty50 is up 9.24% in 2024 (26 December).

This has been possible because of the regular flow of funds by retail investors. TheSystematic Investment Planor SIP amount made new highs this year. SIP flow crossed Rs 20,000 crore the first time in April'24, and then Rs 25,000 twice (in October and November, December data not available). Between Jan and November 2024, the SIP inflows were Rs 2.42 lakh crore, much higher than the previous years.

As a result, India's domestic market capitalization surged by 18.4% in 2024, reaching an impressive $5.18 trillion and adding $806 billion in value. This remarkable growth positioned India third globally among the top 15 major markets, both in percentage terms and absolute gains. By the year's end, India is set to solidify its place as the world's fifth-largest market by capitalization.

2024 Out-Performers: Small and Mid-Caps

The Indian equity markets delivered a stellar performance in 2024, with small- and mid-cap stocks stealing the spotlight as the top performers. According to data available, the Nifty Smallcap 250 index posted an impressive 25% return despite a 5.7% correction from its 52-week high. Similarly, the Nifty Midcap 150 index delivered a robust 23% return after experiencing a 6.4% decline from its peak.

This trend underscores a notable shift in investor preferences toward small- and mid-cap stocks, driven by their perceived higher growth potential and relative resilience during volatile market conditions. Some factors contributed to this outperformance: 

• Sectoral Tailwinds: Emerging sectors, particularly those in renewable energy, digital transformation, and infrastructure, witnessed heightened investor interest. Many of these sectors are dominated by small- and mid-cap companies, further bolstering their performance.
• Retail Investor Participation: As mentioned in the previous section, the rise of retail investors has significantly influenced market dynamics. Buoyed by increasing access to technology, affordable brokerage platforms, and favourable policies, retail participation has surged, particularly in smaller stocks.

The IPO Market in 2024

Over 300 initial public offers (IPOs) collectively raised a remarkable Rs 1.8 lakh crore in 2024, beating the previous record of Rs 1.3 lakh crore in 2021 and significantly outpacing Rs 57,600 crore raised in 2023. Among these, there were 78 mainboard IPOs, while the remaining were SME IPOs.

Among the 78 mainboard IPOs, 69% are trading at a premium to their offer prices, with 11 trading over 100% above their issue prices. Notable performers include Premier Energies, Bharti Hexacom, and Waaree Energies.

SME IPOs outshone mainboard IPOs, with 28 of 231 SME IPOs listing at premiums exceeding 100%, compared to just four among mainboard IPOs.

We will cover IPOs in 2024 in detail in one of the articles.

The New Year: Expectations from 2025

The year 2025 is poised to be a dynamic one for investors, shaped by a mix of domestic and global factors that could influence market sentiment and investment flows.

Domestic Factors

• State Elections: With several critical state elections on the horizon, market sentiment could be swayed by the outcomes and their implications for policy continuity. Investors will closely monitor whether the results strengthen the central government's mandate, which could pave the way for more robust economic reforms. Uncertainty in the lead-up to the elections might result in short-term volatility in equity markets.
• RBI's Monetary Policy: The Reserve Bank of India is likely to adopt a cautious stance on interest rate cuts, aligning them with inflation trends. A gradual reduction in rates could support economic recovery while maintaining financial stability. Investors in rate-sensitive sectors like banking, real estate, and automobiles will closely track these developments.

Global Factors

• Geopolitical Tensions in West Asia: Persistent tensions in West Asia could lead to supply chain disruptions and volatility in crude oil prices, impacting inflation and the trade deficit. Such scenarios might weigh on sectors like oil and gas and increase India’s import bill, affecting investor sentiment in the short term.
• US Monetary Policy: Uncertainty around the Federal Reserve's interest rate trajectory could impact foreign investment flows into India. If the Fed maintains a hawkish stance, it could strengthen the dollar, prompting Foreign Institutional Investors (FIIs) to adopt a cautious approach toward emerging markets. Conversely, any indication of rate cuts might boost inflows into Indian equities.

Conclusion

The year 2024 proved to be a landmark period for Indian investors, marked by strong market performance, especially in the small- and mid-cap segments, and a sharp rise in market capitalization.

Despite global uncertainties and domestic challenges, India’s economic resilience, policy reforms, and growing retail participation fuelled investor confidence. Key sectors such as banking, IT, and manufacturing stood out as major growth drivers, while India’s emergence as a preferred investment destination further underscored its global relevance.

*All the data in this article is up to 26 December 2024