2024: A year of riddles
Source: Live Mint
“Interesting” election results in three major world powers. Continued economic uncertainty in another one. And continued geopolitical tensions in yet another. To cut rates or not, the constant question. The threat and opportunities posed by the two letters, AI.
In all this, 13%+ returns on the NIFTY 100 and 24%+ on the mid-cap index. Sitting at the beginning of 2024, this is perhaps not the obvious outcome and a reminder of the lines from Anand: “Zindagi kaisi hai paheli hai. Kabhi yeh hasaye, kabhi yeh rulaye.”
For all we attempt to predict, economic events remain unpredictable, the market reaction to event outcomes even more unpredictable (remember 4th June!), and traditional relationships between macro variables and markets don’t always hold true. In case you thought markets were the only ones delivering pahelis, spare a thought for the movies: The highest-grossing Hindi language film was a so-called small-budget horror comedy sequel,Stree 2, and the highest-grossing Hindi film in aggregate was a dubbed Southern film, Pupsha 2.
Here is 2024 personal finance, with a touch of help from film quotes:
- In Zindagi Na Milegi Dobara, Abhay Deol encourages a hesitant Hrithik Roshan to take a leap of faith and jump out of a plane during their skydiving adventure. “Jab tak tum dare nahi, tum jeete nahi.” Indian investors are truly overcoming their fear of equities as mutual funds and demat accounts soared, and traditional fixed return investments lagged in 2024. Mutual funds, as a percentage of bank deposits, are nearly 30%. Risk-taking appetite and equity market confidence are rising. The average Indian is more aspirational, more aware, and thanks to digital mediums, has more access.
- The Fight Club may be as old as 1999, but Edward Norton’s conversation with Brad Pitt about the impact of materialism has aged well. Do you remember: “The things you own end up owning you?” Once a symbol of convenience and financial freedom, easy access has taken credit cards to a tipping point, with outstandings and defaults rising. Young Indians, pushed by a culture to live, eat and dress like their role models on social media, risk being stuck in a credit card trap that has got everyone, including the Reserve Bank of India, rightly watching.
- Speaking of lures, nothing lures like an exotic fund. In The Devil Wears Prada, the iconic Miranda Priestly (Meryl Streep) reminds a young intern, “You sold your soul to the devil when you put on your first pair of Jimmy Choos.” This year, investors were searching for the Pradas and Jimmy Choos and Guccis in the boring dal-chawal world of funds. Exotic themes like defence and electric vehicles became mainstream, with sectoral funds as a category growing larger than a core giant like flexicap.
- “Sona kabhi purana nahi hota.” Indeed. Ram told Leela this in Goliyon ki Ras Leela: Ram Leela in the context of love, and an old 90s favorite song, “Sona kitna sona hai” made a popular comeback in this year’s heist film Crew. Investors returned to gold, which, at 21% returns, beat the Nifty and S&P500. Interestingly, while an old favourite got investor love, the once futuristic store of value, cryptocurrency, had a hard year with regulatory uncertainty and challenges with multiple crypto exchanges.
- One of the best tweets I read this year said, “I met a wise fund manager who said: Just stay invested, markets are going up every day. At the same event, I met another wise fund manager who said: Just sit in cash, markets are too expensive.” The conundrum has been real. For all the enthusiasm, there have been warnings, exit calls on mid caps and small caps, cash calls in funds. And yet, stocks at 50 PE became 100 PE six months later. Balancing sanity while delivering returns in an environment of flush liquidity has made fund management harder and harder. As the lines in Rangeela go, “Kya karein, kya na karen, yeh kaisi mushkil hai”.
My advice for 2025: Don’t forecast. Be bi-focal: Know the potential of long-term returns in this decade in India, and accept the reality of the short-term drama. Portfolios should remain like a good thali—multi-asset in nature, with good simple products that are liquid, in quantities that your risk appetite can digest. Forecasting both Nifty returns and box-office outcomes in the short term is futile, so enjoy the show as it unfolds. Happy New Year and happy investing.
The views are personal.
Radhika Gupta is the managing director and chief executive at Edelweiss Asset Management Ltd.
