In this edition, we talk about how and why this has been a record-breaking year for India’s stock markets. We also talk about the downfall of a former American crypto billionaire and why Indian billionaires Mukesh Ambani and Gautam Adani are joining hands. Finally, we talk about the new T+0 settlement system and what it means for retail investors.
Welcome to Kuvera’s weekly digest on the most critical developments related to business, finance, and the markets.
tl;dr Hear the article in brief instead?
To say that this was a stellar financial year for India’s capital markets would be an understatement, by a mile. In 2023-24, domestic equities reached several milestones and shattered many records.
Nifty, the benchmark 50-share index of the most valuable listed companies in the Indian market, jumped 29% this financial year while the 30-stock Sensex, too, returned an impressive 25%.
This has been Nifty’s best performance since 2020-21, when stocks rebounded after a drastic plunge in March 2020 following the Covid-19 pandemic.
The Nifty also outperformed most global peers, except the Nasdaq Composite, which rose 34.2%, and Japan’s Nikkei, which rose 43.35%. In fact, excluding FY21, Nifty’s returns in the current financial year were the best in over a decade.
The small-cap and mid-cap segments did even better than the large-cap benchmarks. Despite the recent selloff, the Nifty Smallcap 100 and the Nifty Midcap 100 indices soared 70% and 60%, respectively, as retail investors shrugged off the warnings of froth and overvaluation in the segments by the Securities and Exchange Board of India.
The good news doesn’t just end here. During the year, all three indices hit record highs on several occasions, and India’s total market capitalisation came close to the $5 trillion mark. The broad-based rally in domestic equities pushed India’s market capitalisation by Rs 50 trillion to finish the year at Rs 387 trillion ($4.7 trillion). India also overtook Hong Kong during the year to become the world’s fourth-largest market.
In fact, the Indian economy as well as the stock market weathered local and global challenges such as high interest rates, a US banking crisis, rising bond yields, and geopolitical conflicts.
But why are markets drunk on the cool aid, you may ask? The dovish stance of the US Federal Reserve towards the end of the financial year, robust economic growth, moderate oil prices and hopes of political stability in India could be the best possible reasons driving up the market.
What further helped were record foreign fund inflows. According to data from the National Securities Depository Ltd, India received overseas inflows of Rs 3.39 trillion, or $41.04 billion, in equities, debt and hybrid instruments put together this financial year, a record for any year. This is 27% more than the previous high recorded in FY21 in rupee terms and 13.4% higher in dollar terms. Foreign funds had pulled out $16 billion and $5.5 billion from India in the last two years.
Equity flows stood at over $25 billion, more than the combined flows received by all other Asian markets except Japan, which received $59.5 billion. China, on the other hand, saw outflows of over $67 billion in the 12 months to December. Some of the flows could have made their way into India, another report noted.
But it is not just equities that investors have been bullish on. FPIs have invested $14.6 billion in Indian debt, higher than all other years except FY15 and FY18, NSDL data show, as investors took a shine to government bonds anticipating India’s inclusion in global bond indices. Another $1.5 billion of FPI money has flowed into hybrid instruments, per NSDL data.
So, where do markets go from here? Folks who track the markets are quite hopeful about the coming financial year.
And what do we think? All we can say is, amid all the optimism, as a retail investor, you should not throw caution to the wind. It is after all, your own hard-earned money that you are putting on the line.
Crypto’s Crushing Moment
While the Indian markets were on cloud nine, the world of cryptocurrencies has been going through the motions. And this week, marked a watershed moment for the crypto universe as one of its poster boys, Sam Bankman-Fried, co-founder of the failed crypto exchange FTX, was given a 25-year jail sentence for defrauding customers and investors of his now-defunct company.
The ruling cements the downfall of the former billionaire, who emerged as a high-profile champion of cryptos before his firm’s dramatic collapse in 2022. He was found to have stolen billions from customers ahead of the failure.
Bankman-Fried’s legal team will appeal against his conviction.
Earlier, the 32-year-old said in court he knew a lot of people felt “really let down”. “I’m sorry about that. I’m sorry about what happened at every stage,” he said, speaking quietly and clearly ahead of his sentencing.
FTX was one of the world’s largest crypto exchanges before its demise, turning Bankman-Fried into a business celebrity and attracting millions of customers who used the platform to buy and trade cryptocurrency.
Rumours of financial trouble sparked a run on deposits in 2022, precipitating the firm’s implosion and exposing Bankman-Fried’s crimes.
He was convicted by a New York jury last year on charges including wire fraud and conspiracy to commit money laundering, after a trial that detailed how he had taken more than $8 billion from customers, and used the money to buy property, make political donations and put toward other investments.
But the former billionaire should be grateful despite the harsh sentence. While 25 years is indeed a long prison sentence, it is far less than the more than 100 years he could have received under government guidelines.
Billionaire Bonding
While one former billionaire is set to spend the next couple of decades behind bars, India’s two richest billionaires seem to be getting set to chart a new trajectory in the coming years.
Mukesh Ambani and Gautam Adani are set to collaborate for the first time, with the former’s conglomerate Reliance Industries picking up a 26% stake for Rs 50 crore in a Madhya Pradesh power project being developed by Adani Group.
As part of the deal, Reliance will also use 500MW of the energy produced by Adani’s Mahan Energen Ltd for its captive use. Mahan Energen is a wholly owned subsidiary of Adani Power Ltd.
The two businessmen hailing from Gujarat have often been pitted by media and commentators against each other but they have for years tiptoed around each other to reach the top two rungs of Asia’s wealth ladder.
But now that the two big boys have come together, will we see more collaborations ahead? We don’t know, but if they do chime again, we promise we will be the first to inform you!
Trade Quicker
Do you hold shares of the State Bank of India, Hindalco, Vedanta, Bajaj Auto or Ambuja Cements? Well, if you do, then your counters are among the 25 stocks that are now eligible for what is called the ‘T+0 settlement cycle’ from March 28.
Wait, but what does this really mean? A T+0, or Trade + 0 settlement cycle, means the transfer of securities and funds will happen on the same day of the trade. This will run parallel to the existing T+1 settlement cycle in the equity cash market. The Indian stock market fully shifted to the T+1 settlement cycle in 2023.
And which other stocks are eligible for this shorter settlement period?
Ashok Leyland, Bank of Baroda, Bharat Petroleum Corporation Ltd (BPCL), Birlasoft, Cipla, Coforge, Divi’s Laboratories, Indian Hotels Company, JSW Steel, LIC Housing Finance, LTIMindtree, Samvardhana Motherson International, MRF, Nestle India, NMDC, Oil and Natural Gas Corporation (ONGC), Petronet LNG, Tata Communications, Trent and Union Bank of India are among the other stocks that qualify for now.
How does the shorter settlement period help? Shorter settlement cycles help increase liquidity in the market and lower risk. Market analysts also believe this would enhance the efficiency of market operations and help free funds.
Market Wrap
This was a truncated trading week, with the markets being open for business for only three out of the usual five days. Both the benchmark indices, Sensex and Nifty, rallied this week and ended in the green, up 1.1% and 1.0%, respectively.
The upsurge was led by Bajaj Finance, Adani Ports, Maruti Suzuki, Larsen & Toubro, and Titan. Other Nifty counters that ended firmly in the green this week were IndusInd Bank, Bajaj Auto, Hero MotoCorp, Adani Enterprises, Tata Steel, Hindalco, Grasim, Sun Pharma, Cipla and NTPC.
IT majors were among the Nifty stocks that did not fare well. These included Infosys, TCS, Tech Mahindra, HCL Tech, LTIMindTree and Wipro. These stocks lost ground after Accenture last week cut its revenue guidance and brokerages turned cautious on the sector. Tata Consumer and Divi’s Lab, too, lost ground.
Other headlines
- ICICI Securities merger with ICICI Bank on track as shareholders approve delisting
- Adani family increases stake in Ambuja Cement by infusing Rs 6,661 crore
- Adani Energy in talks with banks to borrow $600 million
- Hindustan Unilever in initial talks for sale of Pureit
- Former HUL boss Sanjiv Mehta teams up with private equity firm L Catterton for India investment JV
- LatentView Analytics to acquire 70% of Decision Point for $39.1 million
- PTC India gets shareholders’ nod to divest 100% stake in energy arm
- Sanlam Life sells Shriram Finance shares worth Rs 1,427 crore
- Karnataka Bank approves Rs 600 crore QIP share allotment
- Shapoorji Pallonji Group seeks to raise Rs 20,000 crore; Tatas keep an eye on pledged shares
- India adds 24 GW of solar PV manufacturing capacity in 2023
- Core sector output grows 6.7% in February versus 4.1% in January, govt data show
- Centre annuls auction of 13 critical mineral blocks
That’s all for this week. Until next week, happy investing!
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
Watch here: Understanding Index Funds from experts
Start investing through a platform that brings goal planning and investing to your fingertips. Visit kuvera.in to discover Direct Plans and Fixed Deposits and start investing today.
