In the latest trading session, the SENSEX experienced a significant decline, dropping 700 points to settle at 84,266.29, while the NIFTY hovered around the 25,550 mark. This downturn comes amid escalating tensions in the Middle East, particularly the Iran-Israel conflict, which has led to increased volatility in global markets.
Market performance in 2024
Despite the recent fluctuations, 2024 has been a remarkable year for investors in the Indian equity market. The market capitalisation of BSE-listed firms surged by an impressive ₹110.57 lakh crore, bringing the total to ₹4.74 lakh crore (approximately $5.67 trillion). Notably, the market valuation of all listed firms at the BSE reached an all-time high of ₹477.93 lakh crore on September 27. The BSE Sensex surged 12,026.03 points, marking a 16.64% increase year-to-date and delivering substantial returns to investors.
The role of domestic liquidity
Analysts highlight robust domestic liquidity as a key driver behind this growth. According to Santosh Meena, Head of Research at Swastika Investmart Ltd, record inflows into the mutual fund industry have significantly bolstered market performance. "Even with selling pressure from Foreign Institutional Investors (FIIs), the Indian equity markets reached record highs," he stated. The midcap and smallcap indices outperformed larger counterparts, creating opportunities for retail investors.
Future outlook
Looking ahead, experts remain cautious yet optimistic about the market trajectory. Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd, noted that the recent rally was influenced by expectations surrounding interest rate cuts from the Federal Reserve and the Reserve Bank of India (RBI). However, geopolitical tensions, particularly the ongoing Iran-Israel conflict, could introduce volatility in the short term.
As the year progresses, investors are advised to keep an eye on sector-specific opportunities, with the strength of domestic liquidity providing a buffer against potential market corrections. "As we approach the US elections and navigate ongoing geopolitical uncertainties, corrections may occur. Yet, driven by strong domestic fundamentals, sector and stock-specific opportunities will continue to emerge," Meena added.
In conclusion, while the recent drop in the SENSEX signals a moment of caution, the overall outlook for share market investment remains positive, supported by solid economic fundamentals and investor confidence. Investors must remain vigilant, leveraging market opportunities amid the fluctuations to ensure their portfolios thrive in this dynamic environment.
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