'Market momentum to continue in 2024 but stick to large-caps'

After a difficult year, the stock markets are seeing a pick-up in the latter half of 2023. The S&P BSE Sensex is up 15.8% for the year. Up until 26 October, it had just delivered 3% year-to-date returns. What is expected next year? In an interview with Mint, Devina Mehra, founder of First Global group, shares why she thinks the current market run-up was always in the offing and what her outlook on the markets is for the next year.

- Jash Kriplani

Mehra, who is currently based out of Dubai, started her professional career in Citibank, working in the investment banking/corporate finance group and in corporate risk group from 1986-1993. In 1993, she quit Citibank and got membership of BSE. This proprietorship was later corporatized into First Global, along with her membership of National Stock Exchange, London Stock Exchange and National Association of Securities Dealers, US.

The market momentum in India should continue for now. There may, however, be some small corrections, says Mehra, adding investors should, however, continue to remain invested for the long term. At, the same time, they should be wary of small-caps, micro-caps and even be cautious when it comes to investing in initial public offers (IPOs).

Edited excerpts:

Geopolitical tensions, inflation, high interest rates have all been concerns in 2023. But despite all that, the markets are seeing a run-up. Why is this so?

The run-up has not come as a major surprise. And the reason for this is more long-term. If you look at the data for Indian markets, we all have this impression that equity markets compound returns at 15-16% because that has been the returns delivered by main indices like Sensex since they started 40 years ago. But what people don’t realize is how much that return varies. For example, if you look at the 1980s. If you had invested ₹100 at the beginning, you would have got over ₹700 at the end of the decade. So, that translated into compounded annual growth rate (CAGR) of 21%. Whereas between 2010 and 2020, if you had invested ₹100, you would have got only ₹230 at the end of the decade or 8.7% CAGR. Fixed deposits would have fetched ₹190-200 during this same period. Hence, the excess return was not much.