India Equity Strategy_ The Year That Was - Bull Run Intensifies

Summary of Key Points from the Conference Call Industry Overview - Sector Performance: In 2024, seven out of ten sectors achieved positive returns, with Communication Services leading at 40% growth, followed by Consumer Discretionary at 46% and Health Care at 39%. Conversely, Consumer Staples was the worst performer, declining by 6%, and Technology continued to underperform, with a drop of 31% relative to its Emerging Market (EM) counterparts for the third consecutive year [2][34]. Company and Market Metrics - MSCI India Performance: MSCI India's ranking improved to 4th among 24 EMs, up from 9th in 2023 and 12th in 2022, outperforming the EM Index by 6 percentage points in 2024, following a 13 percentage point outperformance in 2023 [11]. - Market Capitalization and GDP: As of 2024, India's GDP reached $3,787 billion, with a market capitalization of$5,184 billion, resulting in a market cap to GDP ratio of 136.9%, up from 125.1% in 2023 [6]. - Foreign Portfolio Investment (FPI): FPIs recorded a net inflow of only $14 million in 2024, a significant decrease from$21 billion in 2023, primarily due to participation in the primary market. Domestic institutions, however, purchased stocks worth $60 billion [32]. Trading and Investment Flows - **Trading Volumes**: Total trading volumes annualized in 2024 reached approximately$11.58 million, with cash trading volumes at $3.76 million and derivatives trading volumes at$7.82 million [6]. - Mutual Fund Activity: Total mutual fund assets under management (AUM) increased to $673.7 billion, with equity mutual fund AUM at$427.5 billion. Systematic Investment Plan (SIP) flows rose to $3 billion per month in the last quarter of 2024 [6][32]. Economic Indicators - Yield Curve and Currency Fluctuations: The yield curve rose by 21 basis points from its low in March 2023. The Indian Rupee depreciated by 2.7% against the USD but appreciated by 3.2% against the Euro [33]. - Market Volatility: Market volatility increased from multi-year lows after three consecutive years of decline prior to 2024 [12]. Additional Insights - Equity Issuances: Equity issuances rose sharply in 2024, accounting for 0.8% of market capitalization, compared to 0.5% in the previous year [13]. - Sector Performance Trends: Mid- and small-cap indices outperformed the Sensex by 16 and 19 percentage points, respectively, indicating a shift in investor preference towards smaller companies [31]. This summary encapsulates the critical insights and data points from the conference call, providing a comprehensive overview of the current state of the Indian market and its sectors.