2023: A year when equity gains surprised investors, Sensex surged 18.7%

2023  was a year when equities surprised investors with their gains. At the beginning of the year, investors were warned about debt giving tough competition to equities, uncertainty about rate hiking by central banks and concerns about valuations. But 12 months later, the Sensex has gained 18.7 per cent, and the Nifty 20 per cent and debt funds have given single-digit returns. This year's gains were attributed to robust flows from domestic and foreign institutional investors, stable macro numbers, and corporate profits aligned with expectations. The Federal Reserve's statement about rate cuts happening next year and the results of the state elections, which renewed hopes of regime and policy continuity, further boosted sentiments. In December, Nifty ended ten sessions with new highs and Sensex during nine sessions. India's strong macros are likely to bring gains, but turbulence is expected next year due to elections. How the Fed's rate cut trajectory pans out will also determine how the market moves.

1) FPI chart- After being net sellers in the first two months, foreign portfolio investors (FPIs) turned buyers again. They bought shares worth Rs 1.7 trillion on a net basis, the best since 2020.

2) Demat account table- The gush of domestic investors to Indian equities continued in 2023, and 27 million new Demat accounts were opened. Apart from market buoyancy, a better IPO market and a relaunch of new derivatives contracts with reduced lot sizes and new expiry cycles have contributed to luring new investors.

3) Fundraising table- The number of IPOs rose in 2023, but the overall fundraising declined compared to 2022 as smaller-sized issues dominated. QIPs saw a revival led by banks. SME IPOs hit a new record in terms of the number of issues and funds raised

4) FPI MF Table- Mutual funds bought more equities than their foreign investors for the third year, though the net buying declined slightly compared to 2022.

5) FPI EM- India was the fourth highest recipient of  FPI flows amongst major equity markets. This year, India's macro stability and China's tepid economic growth helped attract flows.

6) Rupee- This year, the rupee displayed stability against the US dollar. 2023 marked the least volatility witnessed in nearly three decades. The local currency experienced a marginal depreciation of 0.6 per cent against the dollar.