Even as 70% of the stocks in the BSE Sensex, BSE Midcap, and BSE Smallcap indices have delivered positive returns during the current calendar year, a significant number — approximately 325 — are grappling to remain above water.
With a fall of nearly 68% so far, Fusion Micro Finance declined the most in the BSE Smallcap index in 2024. Shares of the company tanked to Rs 186.75 on December 13, 2024, from Rs 576 on December 29, 2023. Spandana Sphoorty Financial and Filatex Fashions also declined nearly 67% each during the same period.
In the smallcap space, HMA Agro Industries, GVK Power & Infrastructure, Kamdhenu Ventures, and India Pesticides also retreated 51%, 50%, 48%, and 47%, respectively, year-to-date. On the other hand, the BSE Smallcap index gained 33.5% YTD.
So, what should investors do currently? Global financial services firm HSBC said, “We prefer Indian large caps over small- and mid-caps due to their relatively attractive valuations and better earnings profile.”
In the BSE Midcap index, which has gained 30% YTD, Zee Entertainment Enterprises slipped nearly 52% YTD. Aarti Industries, Bandhan Bank, Relaxo Footwears, IDBI First bank and AU Small Finance Bank also lost over 25% in the ongoing calendar year till December 13.
Overall, 2024 turned highly volatile for the domestic equity market from October onwards. The NSE Nifty and BSE Sensex peaked in September before sharply correcting in October and November this year. This turbulence was driven by global economic weaknesses, geopolitical tensions, high valuations and elections in the US and India. Foreign Portfolio Investors (FPIs) purchased equities worth Rs 93,000 crore until September but sold more than Rs 1.10 lakh crore of shares in October and November.
As many as eight companies in the 30-share Sensex pack have eroded investors’ wealth on a YTD basis till November 13. IndusInd Bank plunged 38% since December 2023. Asian Paints, Nestle India and Hindustan Unilever also lost 29%, 15% and 10%, respectively, during the same period. Kotak Mahindra Bank and Titan Company also declined 5% each YTD. The BSE Sensex has advanced nearly 14% so far in 2024.
According to JM Morgan Asset Management, India is expected to maintain strong earnings momentum due to falling rates and robust services export growth. Recently, foreign inflows have stalled due to high equity valuations, which have been bolstered by strong investments from domestic investors. This could eventually result in a market correction. However, there is likely a floor as the long-term investment case remains highly compelling. Furthermore, India stands out as one of the leading destinations for “friendshoring” in EM Asia, potentially boosting foreign direct investment and driving growth in the manufacturing sector.
HSBC said, “We find promising domestic-driven opportunities in India and ASEAN, riding on the secular tailwinds from young demographics, rising middle-class consumers, and technology boom.”