Published on: January 3, 2025
The year 2024 proved to be another impressive chapter for Indian stock markets, with the benchmark indices, Sensex and Nifty, ending the year with 8% gains. This marks the continuation of a remarkable streak – nine consecutive years of positive yearly closes. While the last five years were defined by high volatility, primarily due to the global pandemic, the markets have adapted and evolved, transforming India’s investment culture for the better.
As traders and investors know, volatility is often seen as a threat. However, it can become a powerful driver of opportunity when managed correctly. This year, various market events created waves, and investor sentiment became a key factor in shaping the direction of the markets. Our philosophy is simple – trade what you see, not what you believe. The ability to react to what’s happening, rather than being swayed by personal opinions, is what separates successful traders from others.
Check the events that unfolded in 2024 and how the Nifty50 reacted:
Performance of NSE Indices
2024 brought a few surprises when it came to market performance. The Nifty50 gained 8.80%, but this underperformed the broader Nifty500, which recorded a robust 15.16% return. The Nifty500’s strong performance shows the increasing breadth of the Indian market, with many smaller stocks outperforming the blue-chip index.
However, the true stars of the year were in the Microcap space. The Nifty Microcap250 surged with an extraordinary ~34% gain, leading the way among the various market indices. The Nifty Next50 and Nifty SMLCAP250 also performed well, recording impressive returns of 27% and 26% respectively. For those new to Exchange-Traded Funds (ETFs), the Nifty Next50 ETF has emerged as an attractive investment vehicle, offering a slice of India’s next wave of blue-chip companies.
Sectoral Performance
In 2024, Nifty Healthcare emerged as the top performer, delivering a stellar 40% return. The Pharma and Realty sectors followed closely, posting returns of 39% and 34%, respectively. Interestingly, Nifty Realty, which was the best performer in 2023, continued its upward trajectory this year, showcasing strength in India’s real estate market.
On the other hand, Nifty Media was the only sector to close the year in negative territory, with a loss of 23.88%. This highlights how sentiment-driven sectors can face challenges despite broader market optimism.
Foreign and Domestic Institutional Investors (FII and DII)
The behaviour of Foreign Institutional Investors (FII) and Domestic Institutional Investors (DII) played a significant role in shaping the market dynamics in 2024. While the year started with a lot of scepticism around FII outflows, the total net sales of FIIs in 2024 amounted to Rs. 3,02,435 crores. In contrast, Domestic Institutional Investors (DII) remained bullish, with net purchases of Rs. 5,26,545 crores, an increase of Rs. 3,41,895 crores compared to 2023. This significant increase in DII flows highlights the growing confidence in India’s market and the increasing influence of retail investors through mutual funds.
Key Changes in FII and DII Stake Holdings
Specific trends emerged when analysing the FII stakes. Companies like Cipla and ICICI Bank saw significant FII interest, with stake increases of 3.07% and 2.57%, respectively.
*Data till 30th September 2024
On the flip side, major private banks like IndusInd Bank, Kotak Mahindra Bank, HDFC Bank, and Axis Bank saw reduced interest from FIIs, contributing to the negative performance of the Nifty Private Bank index.
For DIIs, the trend was quite the opposite. While FIIs were selling off stocks in private banks, domestic investors swooped in to buy, leading to increased DII stakes in some of these banking stocks.
*Data till 30th September 2024
he shift in ownership could potentially drive further upside in these stocks, especially if DIIs continue their buying spree in 2025.
Promoter Stake Changes
An important aspect of market sentiment comes from promoter stake changes. The trend of promoters increasing or decreasing their stakes can offer valuable insights into a company’s future prospects.
*Data till 30th September 2024
Tata Motors, where promoters reduced their stake, contributed to the stock’s underperformance of 5.1% for the year. Interestingly, Cipla promoters also reduced their stakes, even as FIIs increased their holdings, indicating divergent views between promoters and foreign investors.
Understanding how FII, DII, and Promoter actions affect stock movements is crucial for traders. When FIIs and DIIs increase stakes in a company, it could signal a shift in market sentiment, offering potential trading opportunities. Similarly, when promoters reduce their stakes, it may indicate a lack of confidence, which could lead to price corrections. Successful traders use this information to make informed decisions, interpreting the data as it unfolds on the charts.
What’s in Store for 2025?
Looking ahead, the outlook for 2025 is one of cautious optimism. While traders typically focus on short-term market moves, we believe in adapting to evolving market conditions and trading according to the chart setups. At Definedge Market Pathshala, we emphasise using technical indicators to spot potential opportunities.
Nifty50 Daily P&F Chart
One such indicator is the D-Smart Line, which has been showing promise for Nifty50. As per our analysis, the index hasn’t closed below the D-Smart Line for an extended period, forming mini-bottoms or “bear traps” within this indicator’s Running and Walking Lines. Historically, when the index breaches above the Running Line, it tends to rally to new all-time highs.
As we speak, the Running Line (RL) is around 25,000, and the Walking Line (WL) is hovering near 23,000. With vertical counts indicating open counts above 27,400, the potential for a strong uptrend is on the horizon, barring any significant bearish developments. During the year, the Walking Line will be a decider for trend change and any close below it will potentially turn into a bearish trend. And remember, retracements are part of every rally, but the D-Smart Line suggests that the demand zone remains intact.
One important stat that could excite you is the index’s performance in the following year’s General Elections in India. As we want more historical data, we highlight the Sensex performance in the table below.
The Bulls are excited with the chart and the stats. Can history repeat in 2025?
To conclude, 2024 has undoubtedly been a year of evolution for the Indian stock market, with strong sectorial performances, retail investor behaviour shifts, and promoter stakes changes. As we move into 2025, readers must focus on what the charts tell them, utilising technical tools and staying informed of broader market trends.
With a keen eye on both short-term opportunities and long-term trends, 2025 could potentially be another rewarding year. But don’t forget to focus on what you see in the market.
