How asset returns varied in 2024 and in the past 10 years

Data does not throw up any pattern to predict winners of tomorrow; a diversified portfolio is the best approach

- Jash Kriplani

While the winners among asset classes keep rotating every year, the absence of any such pattern over the past 10 years (see chart) reinforces the importance of asset allocation in building a balanced portfolio.

Unlike last year, when Indian stock markets were on a tear with the BSE 250 SmallCap Total Return Index (TRI) delivering 47.3% returns, in 2024 the markets seem to have taken a breather. The BSE 250 SmallCap TRI is up 24.1% year-to-date (as of 23 December). The BSE 150 MidCap TRI is up 26.2% (from 42.4% in 2023) and the BSE 100 TRI—which tracks large-caps—is up 13.7% (23.2% in 2023).

In 2024, the markets have been more volatile. The frontline indices—BSE Sensex and Nifty 50—have corrected 10% from their respective highs touched on 26 September.

That came amid a sell-off by foreign investors, downgrades to corporate earnings, and slower economic growth. Foreign portfolio investors (FPIs) have net sold Indian equities worth Rs 95,558 crore since October.

Experts expect some moderation in the momentum, but retain faith in India's structural growth story.

"What we have seen in the last five years in terms of returns across large-, mid-, and small-caps, we are unlikely to see a repeat of that in near-to-medium term," said Nilesh Shah, managing director of Kotak Mutual Fund.

He said valuations are fair, the base is high, and nominal returns will also decline in line with inflation. "Markets will remain weak as long as they (FPIs) are selling aggressively. Their aggressive buying can push market higher."