Property wins big, Adani lags in stellar year for Indian stocks

By Alex Gabriel Simon and Ashutosh Joshi

Indian equities are set to cap a record eighth straight year of gains, with the drivers of the rally transcending the nation’s largest companies.

Robust economic growth, an infrastructure push and a pause in interest-rate increases have helped propel its equity market to successive highs.

Stocks related to real estate, industrials and capital goods are among those leading the gains, while Adani Group companies — the heavy hitters of 2022 — are mostly finishing with losses despite a rebound in recent months.

The benchmark S&P BSE Sensex Index has returned 17 per cent in 2023, poised to cap an eighth annual advance. Expectations that the party led by Prime Minister Narendra Modi will win elections in 2024 are raising hopes that this bull run may continue.

Global funds have bought more than Rs 1,66,44,000 crore ($20 billion) of local shares in 2023, after taking out Rs 1,41,49,525 crore ($17 billion) last year, signaling investors’ preference for India as China grapples with an economic slowdown.

Here’s a look at some of the significant stock moves of 2023:

Real Estate

A measure of real estate stocks rallied to its highest level since 2008, outpacing all other sector indexes managed by the BSE Ltd.

A pause in interest-rate hikes, demand for luxury housing and investments by Indians living abroad boosted developers. Prestige Estates Projects Ltd. surged about 140 per cent, while DLF Ltd. almost doubled.

“A combination of a strong pent-up demand for housing, above average affordability and 12-year low unsold inventory should drive a multi-year virtuous housing cycle,” according to a Jefferies note this month.

Infrastructure

Engineering behemoth Larsen & Toubro Ltd. and UltraTech Cement Ltd. ranked among the top performers on the benchmark gauge, underscoring the focus on building infrastructure in the world’s most-populous nation.

“Cement is a good way to play real estate and infrastructure sectors in India and it can do well in 2024,” said Arun Malhotra, a fund manager with CapGrow Capital Advisors LLP.

“We have seen real estate activity remaining firm and companies getting strong bookings for projects.”

State-owned firms had their best year since 2009 as the government ramped up spending.

While NTPC Ltd. and Power Grid Corp. of India Ltd. led the gains on the key 30-member index, lenders of state projects, including REC Ltd. and Power Finance Corp., surged more than 200 per cent each.

Small- and Mid-Caps

The stellar performance of small cap stocks saw investors flocking to benefit from the gains, with many asset managers opening new funds to capitalize on the demand.

Stocks including AurionPro Solutions Ltd. and Titagarh Rail Systems Ltd. climbed 546 per cent and 365 per cent, respectively. Among notable mid-cap winners are Aurobindo Pharma Ltd., Trent Ltd. and Polycab India Ltd.

For next year, Kotak Securities prefers mega-caps due to their valuations and “greater immunity in the event of any negative developments in the next few months,” the brokerage said in a note dated December 18.

Adani, Vedanta

Four companies of the Adani Group are among the worst 10 performers on the S&P BSE 200 Index this year, with flagship Adani Enterprises Ltd. down more than 25 per cent.

The conglomerate drew global attention after a scathing report from short seller Hindenburg Research in January triggered a stock rout.

Although some of its businesses with lucrative assets such as Adani Ports & Special Economic Zone Ltd. and Adani Power Ltd. have climbed beyond their pre-report levels, most of group’s stocks are yet to fully recover the losses.

Billionaire Anil Agarwal’s Vedanta Ltd. lost 15 per cent this year, with investors wary of the mining giant’s heavy debt load.

Tech, EV

New-age technology companies staged a comeback, with Zomato Ltd. more than doubling in value on growth in online food orders. Tata Motors Ltd. is among the top-performers on the Sensex this year, having soared 85 per cent to a fresh record and underlining India’s push to embrace electric-vehicles for clean energy.