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India’s NSE Nifty 50 and S&P indexes have emerged as strong performers globally this year, closely trailing behind Wall Street’s Nasdaq. Analysts foresee this positive trend continuing into 2025.

In 2024, the Nifty and Sensex have recorded gains of 18.7% and 17% respectively, securing the third and fourth positions among major global stock exchanges. The Nasdaq and S&P indexes have slightly outperformed the Indian benchmarks with gains of around 22% and 20.5%. Following India, Japan’s Nikkei 225 and Germany’s DAX have seen increases of 13% and 12% respectively.

The recent shift in India’s weightage in a key MSCI index surpassing China has been a significant development. Analysts anticipate that the Federal Reserve’s rate cut will drive increased foreign inflows and fuel momentum in the domestic market, safeguarding against potential downturns.

The market rally in India has been fueled by expectations of policy continuity post the national elections and a positive growth outlook. The recent rate cut by the U.S. Federal Reserve further boosted investor confidence. Foreign portfolio inflows are expected to reach a six-month high in September after a slight moderation in August.

The rally has resulted in the Sensex and Nifty reaching their highest 12-month forward price-to-earnings ratios among emerging markets. With technical indicators signaling overbought conditions, sectors like information technology and pharma are likely to benefit from the soft landing expected for the U.S. economy.

Notable top-performing sectoral indices this year include realty, autos, public sector enterprises, pharma, and energy. Domestic institutional and retail investors have played a significant role in driving the market upwards, consistently buying into dips.

Concerns have been raised regarding the high level of domestic inflows through various channels, totaling $7.5 billion per month between January and August. Analysts at Jefferies maintain a cautious outlook on markets, particularly small- and mid-caps.

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