BENGALURU, Sept 20 (Askume) – India’s NSE Nifty 50 (.NSEI) and S&P BSE Sensex (.BSESN) have lagged only Wall Street’s Nasdaq and S&P 500 this year, with analysts expecting gains until 2025.
The Nifty and Sensex are up 18.7% and 17%, respectively, in 2024, ranking third and fourth among major global exchanges.
The Nasdaq (.IXIC) and S&P (.SPX) rose 22% and 20.5%, respectively, slightly ahead of the Indian benchmark. Japan’s Nikkei 225 (.N225) and Germany’s DAX (.GDAXI) followed India, gaining 13% and 12%, respectively.
Earlier this week, India’s weighting in the flagship Morgan Stanley Capital International (MSCI) index exceeded that of China for the first time.
“We expect the Fed’s rate cut to spur foreign capital inflows and provide enough impetus to the domestic market to prevent an economic slowdown,” analysts at Emkay Global said in a note.
Indian stocks rose on expectations of policy continuity and strong growth prospects after national elections in June, and rose further after the Federal Reserve cut interest rates on September 18 .
Foreign portfolio flows slowed in August and are expected to reach a six-month high in September.
The rally pushed the 12-month forward price-to-earnings ratios of the Sensex and Nifty to 23.6 and 24.4, respectively, the highest in emerging markets. Technical indicators suggest that both indices are currently in overbought territory.
Expectations of a soft landing for the US economy could also boost industries such as information technology and pharmaceuticals, which generate a large portion of their revenue from the US, analysts said.
Real estate (.NIFTYREAL) , automotive (.NIFTYAUTO) , public sector enterprises (.NIFTYPSE) , pharmaceuticals (.NIPHARM) and energy (.NIFTYENR) are the best performing industry indices so far this year.
Domestic institutions and retail investors also boosted bargain buying in the stock market.
Domestic institutional investors have bought net shares worth Rs 3.23 trillion since the beginning of the year, according to provisional data from the National Stock Exchange.
Mutual funds have also remained net buyers since February 2021, with contributions through systematic investment plans reaching a record high in 14 consecutive months.
This has raised some concerns, with analysts at Jefferies saying total domestic inflows through mutual funds, direct participation, insurance and pension funds reached “unsustainable highs” between January and August, with monthly amounts of US$7.5 billion.
The brokerage said it remains cautious on the market and small and mid-cap stocks in the near term.
