Year-Ender 2023: Top six factors that disrupted Indian stock market

Year-Ender 2023: The Indian stock market faced a volatile 2023, buffeted by a confluence of global and domestic headwinds. Foreign investor flight, escalating US yields, and the Adani-Hindenburg saga wreaked havoc in the first half of the year, while the second half saw glimpses of revival driven by IT gains and BJP election victories.

Surge in US Treasury yields

Indian equities suffered a loss of USD 2.2 billion of FII money in September 2023, in one of the sharpest single-month declines since January 2023, as the rapid rise in US borrowing costs weighed on risk assets. The holdings of foreign portfolio investors (FPIs) in India reached their lowest levels in a decade amid extensive selling of domestic equities by overseas investors in September 2023, as reported by Mint. The yield on the 10-year US Treasury note climbed to 4.88 per cent for the first time since 2007, while the 30-year offering reached 5.05 per cent, also a 16-year peak.

Adani-Hindenburg row

Adani Group’s troubles started after a report issued by Hindenburg late on January 24, 2023, claimed that many shareholders of Adani Group companies were offshore shell companies and funds were tied to the group itself.

Index funds and exchange-traded funds (ETFs) tracking the Nifty Next 50 Index corrected sharply in two weeks after the report came in. The index dropped by 7.4 per cent. The reason for this was that Adani Group stocks, which accounted for 14 per cent weightage in the index, came under heavy selling pressure after the Hindenburg report.

US shutdown scare

Throughout 2023, the Democrats and Republicans repeatedly clashed over budgetary matters in the US. The country came very close to a government shutdown in October 2023. This came after an intense debate between the Democrats and Republicans over budget allocations. Earlier in the year, too, a confrontation over government expenditure had risked plunging the nation into a debt crisis. Amid the buzz of a partial US shutdown on October 1, 2023, the Indian stock market opened with an upside gap and went on to extend its early morning gains further. However, it later witnessed a sharp correction. “Events like US shutdown affect foreign flows by FIIs and FPIs into the Indian market, which is an important factor for Indian stock markets,” said, Rajesh Sinha, as reported by Mint earlier.

El-Nino scare

India witnessed a deficient monsoon season. Various media reports said August was the driest yet on record. The Indian Met Department said on August 30 that India’s cumulative rainfall stood at 628.7 mm — 9 per cent below normal. According to a report released by data analytics firm NielsenIQ, in October-December, the FMCG industry grew 7.6 per cent in terms of value, but its volume growth declined 0.3 per cent.

FOMC meeting

IT stocks jumped up to 11 per cent in December 2023, tracking gains in US peers, after the US Federal Reserve kept interest rates unchanged while hinting that the 2 per cent inflation target could be achieved earlier than estimated.

BJP’s landslide poll win in 3 states

A decisive mandate in favour of the Bharatiya Janata Party in Chattisgarh, Madhya Pradesh, and Rajasthan sparked a captivating gap-up rally, delivering a noteworthy 3.5 per cent week-over-week return in the broader market. Following a period of subdued performance over the last one or two months, India emerged as an appealing investment destination, surpassing the global market. The Morgan Stanley Capital International (MSCI) one-month return stands at 8 per cent, outpacing MSCI World’s 5.2 per cent, while the one-year return is 12 per cent compared to 13.8 per cent, as reported by Mint.

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Published: 31 Dec 2023, 07:55 AM IST

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