Not just equities, CY23 was good for gold, real estate and bitcoin investors

Equities were not the only asset class that did well last year – gold, real estate and bitcoin also gave double-digit returns.

After a rough 2022, bitcoin gained 156 per cent last year, topping all key asset classes. At $42,556, however, crypto’s largest coin by market capitalisation is still far from the highs of $65,000 it made in 2021.

Nifty returned 20 per cent last year, while the broader market, as measured by Nifty Midcap 100 and Nifty Smallcap 100, ended with gains of 47 per cent and 56 per cent, respectively.

Glittering gold

Gold, based on MCX spot prices, appreciated 15 per cent. Central banks bought 800 tonnes of gold in the first three quarters of CY23, providing a soft support to prices. While global gold ETFs saw outflows, domestic gold ETFs have seen net inflows of ₹2,831 crore in the year till November.

The yellow metal saw a large upmove early last year amid the stress in the US banking system. Prices slid thereafter but geopolitical tensions in West Asia and concerns of a US economic slowdown pushed prices higher towards the year-end.

Housing prices in the top seven cities rose 10-24 per cent last year, primarily due to increased input costs and strong demand. Collectively, the top seven cities saw average residential prices appreciate by 15 per cent in the last one year – from ₹6,150 per sq. ft. in 2022 to nearly ₹7,080 per sq. ft. in 2023, data from Anarock Property Consultants show.

Fixed deposits fetched 6.8-7.25 per cent for tenures of 1-3 years, while most debt funds have returned 6.5-7.8 per cent. Post-tax and after accounting for inflation, the returns will be even lower.

Commodities had a rough year, with Brent crude down 10 per cent and base metals, as measured by LME index, down 5 per cent. The vast majority of investors, though, do not invest in this segment, which is the preserve of professional traders and institutional investors.

Outlook for equities

Market pundits continue to remain bullish on Indian equities despite rich valuations but advocate a pivot to large-cap stocks.

Mid- and small-cap stocks are trading at two standard deviations above their historic premium to large-cap indices, prompting calls for caution.

“Valuations look stretched in certain pockets, as reflected in the micro-cap rally and euphoria in primary issuances, including the SME segment. We prefer increasing exposure to large-caps and value stocks at reasonable prices, away from growth stocks trading at steep valuations,” said a note by Sharekhan by BNP Paribas.

Indian equities are now 77 per cent more expensive than the emerging markets (EM) average, according to Citi’s Wealth Outlook 2024 report. But the bank is maintaining its overweight to Indian equities, with a focus on materials, industrials and staples.

India remains in a sweet spot given the macroeconomic stability, benign commodity prices outlook and corporate earnings momentum.

BofA Global Research believes that rate cuts and a peaking US dollar are a positive for emerging markets, and that EM returns in the 12 months after the last Fed hike in a cycle tend to be highly positive.

ICICI Direct has set a December 2024 target of 25,000 and 83,250 for the Nifty and Sensex, a potential upside of about 15 per cent from current levels.

“Corporate earnings recovery has been healthy in the recent past with Nifty earnings growing at 22 per cent CAGR over FY20-23. Going forward, we expect Nifty earnings to grow at a CAGR of 16.3 per cent over FY23-26E,” it said.