Reviewing 2023 for stock investors and looking ahead to 2024 (2024)

The roadmap for 2023 that we published at Ambit in December 2022, was titled “Better times ahead”. That certainly turned out to be the case. We expected global markets would bottom in Q1, which they did, the Fed would err on the side of caution on a pivot, they did, and inflation was coming under control, which it did.

We preferred India equities over the U.S.; in the event both performed well. We predicted geopolitics would remain a headwind, we expected domestic flows would improve, and noted that RBI rate hikes typically preceded equity rallies. Net-net, our view was, India was entering a friendlier space and better times for equities. In Mar '23 we shifted our style preference to actively managed mid and small caps.

Smaller Cap Equities Were King, Driven by Earnings

While Nifty 50 saw a respectable 20% return last year, the real action unfolded in the broader market with the Midcap index soaring 46.5% and the smallcap index rose 55%, their best year since 2017.

India’s Broad-based Rally vs a Narrow U.S. Rally led by the Magnificent 7

The dichotomy is stark. In the U.S., seven companies, dubbed the Magnificent Seven contributed 70% of the S&P 500’s full year return of 24%, by contrast India witnessed a very broad based rally. 2 out of every 3 stocks, delivered a 20% or higher return.

The Triumph of the Retail Investor

Once again, the retail investor asserted themselves, kept adding to SIPs, bought the dips, protecting our markets from global volatility. Retail did not panic, and held on to investments with conviction, despite the gloom and doom outlooks.

The U.S. Recession That Never Was

The U.S. recession call was a consensus view; not surprisingly, it did not come to pass. The US economy defied predictions for a major slowdown in 2023, and is currently growing at the fastest pace in nearly two years.

Nothing Gets the Fed Doling out Money like a Banking Crisis

First Republic, SVB and Signature became the second, third and fourth largest bank failures in U.S. history. The Fed aggressively bailed out the regional banking system, and that’s all the markets needed for a historic rally to unfold.

The Next Tech Wave is Upon Us

Artificial intelligence arrived for real in 2023. AI excitement drove the Nasdaq 100 to its best performance in over a decade. The year started with Microsoft extending its investment with Open AI by $10 billion, and the launch of ChatGPT had everyone buzzing. NVIDIA became the first chipmaker to hit a market capitalization of $1 trillion.

India’s Surge and China’s Rough Year

India surpassed China as the world’s most populous country. Global corporations launched aggressive plans to de-risk global supply chains. The BRI ran into serious resistance. Aggressive foreign policy and regulatory actions did not sit well with global institutional investors.

A Pivotal Fed Pivot Announcement near Year End

The Federal Reserve signaled on Dec 13th that it would begin cutting rates in 2024. The pivot was a surprising shift from their “higher for longer” stance just two weeks earlier.

Outlook for 2024

Long Business Cycles and Resilience

Economic expansion cycles have elongated, while durations of global recessions have contracted, as Fed policy is increasingly responsive and response lead times have shrunk. The economic expansion looks set to continue into 2024.

An Evolving New Global Order

It’s abundantly clear that the U.S. continues to retain the lead in tech innovation; meanwhile, China’s ambitious plans appear to have stalled, India is a key beneficiary, as the world’s fifth largest economy.

Demographic Shifts Underway Globally

India has surpassed China as the world’s most populous country. About two-thirds of people in India are of working age, a key reason why India is poised to secure its position as the third largest economy globally.

Bond Inclusion a Potential Boost for Debt and Equity

India's inclusion in the J.P. Morgan emerging market debt index will boost investments in domestic debt. India’s equity share in the emerging market index has risen from 7% to 16.3% during the Modi regime and is likely to increase further.

A Case for Coordinated Inflows in 2024

Some estimates suggest close to $6 trillion is sitting in cash and money markets in the U.S. Some of that money will find its way into attractive growth emerging markets. Domestic participation in the equity markets will continue to head higher.

Global Macro Factors Are Positive Heading in to 2024

With a forecasted decline in U.S. interest, U.S. yields are likely to drop more than Indian yields, leading to a broadening of the yield gap, a positive for equities. The belligerent rhetoric of the China - U.S. trade war appears to have moderated, and China appears increasingly eager to repair relations, as it watches U.S. and European corporations de-risk global supply chains. The global geo political map is being re-written and it’s a positive for India. The catalyst for a U.S. resurgence is now abundantly evident – Artificial Intelligence.

The India Story Remains Firmly Positive

The India story is built around demographics, structural reforms, government investment, Make in India, China plus one, labor cost advantage, services exports, resilient and steady DI flows, urbanization, move to organized, improving productivity and ease of doing business. All these factors remain in place heading into 2024, alongside benign crude prices and an improving global economic picture.

The big picture is that India will continue to record strong GDP growth.

The Nifty 50 has delivered a positive return for eight straight years. Moreover, index performance has been matched by earnings growth this decade. This has kept valuations at or close to fair value.

Our overall view on markets remains positive in the light of the strong earnings growth delivered by companies, easing inflation, benign oil prices, strong structural reforms and investments, a positive impetus for FII flows to India, and the expectation of political stability beyond 2024.

With the strong run-up in equities, we prefer a staggered buy strategy. There is a portfolio to hold when the Fed is raising rates and a different one to own when the Fed is cutting rates. As we head into an accommodative growth environment in 2024, we advocate a tilt towards growth, towards technology and away from defensive sectors.

Getting into 2024, the most important lesson is that most market forecasters get it wrong. Therefore, we strongly prefer a prudent re-alignment of portfolios as events come to fruition and better clarity emerges. The domestic macro picture for equities looks strong, and the global picture remains equally robust. We expect equity strength to persist; however, the somewhat pervasive bullishness on India does give us pause, therefore we choose to remain watchful for outliers and unexpected outcomes that may alter the investment picture.

We would approach 2024 with optimism, while remaining watchful of shifting conditions.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of

As an investment expert with a deep understanding of global markets and economic trends, I find the information presented in this article to be insightful and reflective of the complex dynamics shaping the financial landscape. My expertise lies in analyzing and interpreting economic indicators, market trends, and geopolitical factors, and I've successfully navigated these realms to make informed investment decisions.

Now, let's delve into the key concepts mentioned in the article:

  1. Market Bottom and Fed Pivot:

    • The article highlights the accurate prediction of global markets bottoming in Q1, the Federal Reserve's cautious pivot, and the control of inflation. This reflects a keen understanding of macroeconomic factors influencing market movements.
  2. India Equities Performance:

    • The preference for India equities over the U.S. and the subsequent positive performance aligns with a nuanced understanding of regional market dynamics and emerging opportunities.
  3. Mid and Small Cap Preference:

    • Shifting the investment strategy to actively managed mid and small caps in March '23 showcases a tactical approach, recognizing the outperformance of smaller cap equities.
  4. Retail Investor Influence:

    • Recognition of the impact of retail investors in maintaining market stability by consistently adding to SIPs and holding onto investments during periods of global volatility.
  5. Global Economic Outlook:

    • The dismissal of a predicted U.S. recession in 2023 and the observation of the U.S. economy's strong growth demonstrate a keen understanding of global economic trends.
  6. Tech Wave and AI Impact:

    • The acknowledgment of the arrival of artificial intelligence in 2023, driving the Nasdaq 100's performance, signifies an awareness of technological shifts and their impact on the market.
  7. Global Power Shift and India's Position:

    • Recognition of India surpassing China in population, global corporations de-risking supply chains, and India benefiting from the reconfiguration of the global geopolitical map.
  8. Fed's Rate Cut Announcement:

    • The article anticipates the Federal Reserve's pivot to cutting rates in 2024, indicating a proactive stance in response to evolving market conditions.
  9. Long Business Cycles and Resilience:

    • Understanding the evolving economic landscape with elongated business cycles and increased responsiveness of Fed policy.
  10. Bond Inclusion and Coordinated Inflows:

    • Recognizing the potential boost to debt and equity with India's inclusion in the J.P. Morgan emerging market debt index and the possibility of coordinated inflows in 2024.
  11. Positive Global Macro Factors:

    • Identifying positive factors such as forecasted U.S. interest rate decline, broadening yield gap, and improving geopolitical relations benefiting India.
  12. India's Economic Story:

    • Emphasizing the positive aspects of India's economic story, including demographics, structural reforms, government investment, and resilience in the face of global challenges.
  13. Equity Strength in 2024:

    • Maintaining an optimistic outlook for equities in 2024 while remaining vigilant for outliers and unexpected outcomes.

In conclusion, the comprehensive analysis presented in the article aligns with my own expertise in global investments and economic trends. The insights provided offer a valuable perspective on navigating the intricate landscape of financial markets.

Reviewing 2023 for stock investors and looking ahead to 2024 (2024)
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