2024 proved to be nothing short of spectacular for the Indian stock market, especially for small and mid-cap stocks which have seen soaring returns. This surge is largely attributed to the tremendously optimistic sentiment among investors, bolstered by significant domestic support and progressive government policies, setting the stage for what many believe will be even greater achievements come 2025.
The BSE small-cap gauge reached its lifetime high of 57,827.69 on December 12, 2024, showcasing extraordinary growth and outperforming the benchmark 30-share BSE Sensex, which hit 85,978.25 on September 27. Until late December, small-cap stocks had recorded impressive gains of 28.45%, reflecting strong demand across various sectors fueled by the Indian economy's stable fundamentals.
“Small-cap and mid-cap indices outperformed due to sectoral growth, policy support, and investor interest,” states Palka Arora Chopra, Director of Master Capital Services Ltd. The sentiment across Dalal Street seemed largely positive as indices not only achieved record highs but did so against challenges posed by Foreign Institutional Investor (FII) sell-offs and global uncertainties.
Mid-cap indices achieved their own record high of 49,701.15 on September 24, 2024, benefiting from government initiatives, particularly infrastructure projects and technological advancements. Analysts have noted significant earnings growth among smaller companies, making these stocks appealing to local investors who seek higher returns.
With domestic liquidity remaining strong, many experts agree there could be more upside for mid-cap and small-cap indices going forward. “Domestic liquidity has been a major driver behind the outperformance of the midcap and smallcap segments,” emphasizes Sunil Nyati, Managing Director of Swastika Investmart Ltd. These two sectors were able to thrive, particularly due to their allegiance to sectors like healthcare, renewable energy, and real estate.
The sentiments entail potential for continued booming returns as both retail and institutional investors ramp up their presence. While foreign capital may seem hesitant amid global economic shifts, domestic flows remain buoyant. “The Nifty could reach new peaks,” predicts technical analyst Jay Thakkar, who remains optimistic about the market’s capacity for growth.
Projections suggest the Nifty could touch 27,500 by 2025, reflecting the anticipated momentum induced by continuous investment from domestic institutions. Investment strategies focusing on bold movements within the sector have also been highlighted, as Thakkar recommends three key stocks expected to yield significant returns for the traders bold enough to invest.
Despite many uncertainties, the year 2024 ends with solid optimism, driven largely by prevailing measures of support from the government and increasing consumer spending across India. The impact of this trend can likely trigger significant shifts as investors look to position themselves advantageously for the incoming year.
Market sentiment is increasingly buoyed by speculations about potential tax cuts announced during February's budget. Both the upcoming third-quarter earnings season and the budget discussion will likely shape market trajectories heading forward. While earnings are predicted to paint encouraging narratives, experts caution about the risks associated with disappointment, which could introduce volatility to prevailing positivity.
The rupee has recently faced depreciation pressures affected by anticipations of the Federal Reserve's monetary policy moving forward and agricultural inflation could also stir the waters. Investors are tasked with balancing these risk factors as they strategize allocations.
Enthusiasm remains particularly well-placed among investors who have shown resilience even amid significant FII selling. With indicators pointing toward continued strength, particularly in smaller segments, the outlook for 2025 is rife with possibilities.
“CY24 has been remarkable for the Indian equity markets, particularly for smallcap and midcap indices, which have significantly outperformed,” report analysts from Bajaj Broking. This clarity indicates not only confidence but also the vast need to continue investing strategically as the Indian economy propels forward.
The upcoming year is anticipated to echo 2024’s dignified upward movement, providing grounds for investors to adapt and capitalize on burgeoning opportunities as they arise. Whether focusing on domestic favorable factors or identifying key sectors for investment, prospects for 2025 remain poised for impressive growth.
