Healthy Sensex In A New Year

As millions of small investors deepen their engagement with the stock market, the focus shifts from short-term volatility to long-term wealth creation.

The Sensex, India's bellwether stock index, experienced a tumultuous 2024. Beginning the year at 72,271 points, it closed at 78,139, marking a robust 9% annual gain. Yet, this seemingly steady rise was punctuated by volatility. The index soared past 85,000 points in September before retreating due to a mix of global and domestic challenges.

The sharp dip in GDP growth to 5.4% in the last quarter—down from a projected 7%—shook investor confidence. Foreign Portfolio Investors (FPIs) turned net sellers, withdrawing significant sums. Corporate earnings forecasts for subsequent quarters further dampened market sentiment. Adding to this was the perception that the Sensex at 85,000 points had entered speculative territory, prompting caution among market participants.

A decade ago, the late Rakesh Jhunjhunwala's prediction of the Sensex reaching 40,000 points was met with skepticism. At the time, the index hovered near 30,000. His vision was far exceeded even before his death in 2022, thanks to a combination of prudent domestic policies and favorable global trends. The market's resilience amid economic disruptions, including the COVID-19 pandemic, underscores the strength of India's financial ecosystem.

The economy weathered the two-year pandemic hiatus with remarkable resilience. Despite exceptional expenditures and a dip in activity, prudent fiscal management ensured stability. The post-pandemic period saw a resurgence in economic activity, fueled by pent-up demand and structural reforms.