Stock market lessons as share investors bid adieu to 2024

2024 has been a strong year for the broader stock market, with the BSE Smallcap and the BSE Midcap indices rallying 25-28 per cent but largecap indices Sensex and Nifty delivering modest 8-9 per cent gains in what was a tale of two halves. Stock market analysts, who participated in a BT Markets year-end survey, said there was a lot to learn from 2024.  

The biggest learning was that chasing momentum in stocks can be a risky strategy. Euphoria-driven rallies are hard to sustain for long, unless there are fundamental drivers of performance such as growth outlook, competitive moat and industry positioning to justify a valuation premium to peers, said Saurabh Jain, Managing Director & Head for Wealth Solutions at Standard Chartered Bank.

Stocks in many sectors including railways and defence rallied earlier part of the year, commanding valuations that seemed frothy, before witnessing earnings downgrades as quarterly results failed to meet expectations. While a dozen railway stocks still gained 10-140 per cent in 2024, they are now down anywhere between 16 per cent and 32 per cent from their recent highs. Defence stocks also witnessed correction of late.

2024 saw a crackdown by Sebi on social media influencers. This should be a big eye-opener for investors, said Shruti Jain, Chief Strategy Officer at Arihant Capital Markets Ltd.

She said investors must invest in what they understand and not on tips from social media, news or incredible sources. If something seems too good to be true, it perhaps is, she said.

Jain said respecting market volatility and enduring geopolitical developments was another learning for investors. After making record highs in the first half of 2024 and hitting the 26,000 level, Nifty went on a correction mode starting October.

"Avoid panic selling. But, at the same time, it is important to know when to sell. Selling when a stock is down feels like giving up, and parting with a soaring stock is tough, even if it's the best time to sell. Interestingly, many investors faced both these dilemmas in 2024 – not being able to book profits even when the valuations were stretched and unable to book loss despite knowing the uncertainties associated with the investment," Jain said.

Analysts said corrections are the times when one finds really great companies at good valuations. But the fear often gets the best of investors. They said one must not let greed or fear guide investment decisions.

Jathin Kaithavalappil, Assistant Vice President at Choice Broking said investors must learn to remain patient and not be herd-spirited. "They must have a much more asset-allocated diversified portfolio instead of becoming overweight by emotional trading with short-term price swings. Sticking with quality stocks and remaining disciplined regarding SIPs could prove to be solid lessons in the volatile market of 2024," he said.

Ajit Mishra - SVP, Research, Religare Broking Ltd also emphasised the necessity of maintaining a disciplined, long-term investment strategy. Ultimately, resilience and informed decision-making emerge as critical components for successfully navigating market challenges, he said.

For Mohit Batra, Founder at MarketsMojo, the biggest takeaway from 2024 was that investors should avoid taking cash calls and maintain a long-term bullish outlook on India’s economy and stock market.

"While challenges are inevitable, the Indian market has consistently demonstrated resilience and adaptability. The key lesson is: Never bet against India. Foreign Portfolio Investors (FPIs) learned this the hard way in 2024," he said.

Shiv Chanani, Senior Fund Manager - Equity Baroda BNP Paribas Mutual Fund said the year 2024 began on the back of a stellar 26 per cent return by NSE500 Index in 2023 and the biggest question on everyone’s mind was whether the market still had legs.

"As we write, the broader market has delivered another 23 per cent return in the current calendar year. Hence, the biggest lesson for investors is to keep focussing on the fundamentals and not get coloured by the market returns in the immediate past. This is as much true for the future also as investors should not extrapolate last 2 years returns for the foreseeable future and should temper down their expectation to be in line with the long-term returns which are in mid-teens," Chanani said.

Narendra Solanki, Head Fundamental Research - Investment Services at Anand Rathi Shares and Stock Brokers said Retail investors should have a diversified portfolio with quality stocks in emerging sectors which can mitigate the risk of loss and volatility.

"At the same time, they should ignore the temporary negative sentiments of markets which are result of short term news or adverse event. The growth story of the Indian economy remains intact and to remain so for the next several years to come. Therefore, they should have a longer-term horizon to witness the effect of compounding," he said.