India’s Nifty, Sensex outperform most global markets, trailing only Wall Street

By Bharath Rajeswaran

BENGALURU (Reuters) – India’s NSE Nifty 50 and S&P BSE Sensex trail only Wall Street’s Nasdaq and S&P 500 as the best-performing indexes this year, with analysts expecting the rally to extend into 2025.

The Nifty and Sensex have gained 18.7% and 17% respectively in 2024, securing the third and fourth spots among the major global bourses.

Nasdaq and S&P added about 22% and 20.5%, slightly above the Indian values. Japan’s Nikkei 225 and Germany’s DAX follow India, up 13% and 12% respectively.

Earlier this week, India’s weight in a key MSCI index overtook China for the first time.

“We expect the Fed’s interest rate cut to accelerate foreign flows and create enough momentum in domestic markets to hedge against downside,” analysts at Emkay Global said in a note.

India’s stock market rally, driven by expectations of policy continuity following June’s national elections and robust growth prospects, gained fresh momentum after the US Federal Reserve’s significant interest rate cut on September 18.

Foreign portfolio inflows, which moderated in August, are on track to hit a six-month high in September.

The rise pushed the 12-month price-earnings ratio for the Sensex and Nifty to 23.6 and 24.4, respectively — the highest among emerging markets. Technical indicators show that both indices are now in overbought territory.

Expectations of a soft landing for the US economy will also boost sectors such as information technology and pharmaceuticals, which earn a significant share of their revenue from the US, according to analysts.

Real estate, auto, public sector companies, pharmaceuticals and energy are among the best performing sector indices this year.

Domestic institutional and retail investors also fueled stock market buying throughout the dips.

Domestic institutional investors have bought stocks worth a net 3.23 trillion rupees since the start of the year, according to provisional data from the National Stock Exchange.

And mutual funds have remained net buyers since February 2021, with systematic investment plan contributions hitting record highs for 14 consecutive months.

That raised some concerns, with analysts at Jefferies saying combined domestic inflows through mutual funds, direct holdings, insurance and pension funds were “unsustainably high” at $7.5 billion a month between January and August.

The brokerage said it maintained a cautious short-term view on small- and mid-cap markets.

(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Nivedita Bhattacharjee)