Impressive show by small-cap stocks

New Delhi: FY24 marked a rewarding period for the Indian market. Large-caps recorded a substantial 33 per cent return, mid-caps surged by 56 per cent, and small-caps excelled with an impressive 63 per cent, as indicated by the respective broad indexes, says Vinod Nair, Head of Research, Geojit Financial Services.

Markets were boosted by the upgrade in FY24 economy growth, as the Indian GDP forecast was uplifted on a QoQ basis from 6.4 per cent to 7.3 per cent during the year. There was a rampage in corporate earnings growth with the 23-24 per cent YoY EPS forecast for the Nifty50 index, he said.

Retail inflows remained robust, supported by direct investments as well as investments through MFs. The number of trading accounts held by domestic investors reached 16.7 crore, underscoring increased market participation. Additionally, FIIs exhibited improved net buying activity, buoyed by India's economic outperformance relative to other EMs experiencing slowdowns, he added.

However, the year ended on a subdued note, with substantial selling pressure till the 20th of March.

Nevertheless, there has been some relief in the market in recent trading sessions as the pressure from leveraged selling has eased and buying activity has improved, albeit at lower volumes, he said.

In the coming first week of April, there is a flurry of significant data releases expected, like PMI in the US and India, factory orders, and unemployment data in the US.

Additionally, market participants will closely monitor signals regarding policy rates, particularly from the RBI. Moreover, attention will be on India's Q4FY24 result forecasts, which are expected to indicate a healthy performance, he said.

“As we move into a new financial year, we express optimism towards sectors such as Pharma, Capital Goods, and Infra, as we see them as key growth drivers, supported by both domestic and external demand,” he said.

Although some sectors like FMCG and IT are facing challenges due to subdued demand at present, we anticipate a turnaround, driven by expectations of a normal monsoon and increased US demand following the Fed's rate cut. However, the focus is on large caps, as the premium valuation of mid-caps could have a hiccup in the short to medium term, he added.