Indian stock markets rally in 2023: In early 2023, Indian stock markets started on a tough note, experiencing a notable decline and reaching a 52-week low. The benchmark indices then rebounded impressively, pushing India into the list of the top 10 best-performing global markets.
According to an ET report, the Nifty50 index has demonstrated strength with an 18% year-to-date gain. Bouncing back from a low of 16,828 points in March, it surged over 28%, reaching a record high of over 21,000 points by the end of 2023.
In this positive market period, the Nifty50 performed better than many developed and emerging market counterparts. Meanwhile, China’s Shanghai Composite index struggled for a second year, posting negative returns over 5% in 2023 after a 15% loss in 2022.Foreign and domestic capital inflows in 2023
Indian market rally can be credited to substantial inflows of both foreign and domestic capital. In 2023, foreign portfolio investors boosted Indian equities with more than $22 billion, marking a rebound from the significant outflows recorded in 2022. Simultaneously, domestic institutional investors added around $20 billion during the same period.
Even with significant outflows of Foreign Portfolio Investments (FPIs) in 2022, Indian equities emerged as the world’s second-best performers, following Brazil. This success can be attributed to favorable domestic macroeconomic conditions and a record-high inflow of $23 billion from domestic institutional investors.

Expected FPI comeback and MSCI index surge
Experts in the market had expected a comeback of Foreign Portfolio Investments (FPIs) in 2023, considering India’s favorable position compared to other global economies. The rally in Indian equities notably raised their significance in the MSCI Emerging Market Index, exceeding that of Taiwan.
India secured a 15.5% weightage in the MSCI Emerging Market Index, surpassing Taiwan’s 15.1%, and experiencing a significant rise from 12.97% at the end of January. The MSCI India index performed remarkably well, delivering a 36% return in 2023, in contrast to the MSCI AC Asia Pacific index, which saw a modest 6% return.
India’s favorable position relative to most global economies can be attributed to factors like rapid economic growth, strong corporate earnings, capex growth, and a widespread recovery in consumption.
India poised to attract foreign investors in 2024?
As we look ahead to 2024, India seems well-positioned to maintain its attractiveness to foreign investors, meeting all the necessary criteria. Numerous financial experts expect India to remain a preferred long-term destination for Foreign Institutional Investors (FIIs), with the anticipation that FII inflows in 2024 will exceed those observed in 2023.
Jonathan Schiessl, Deputy CIO of Westminster Asset Management, told ET, “I think flows will remain positive and in the global backdrop, if the dollar comes off a little bit and US interest rates ease back, that should be good for markets like India and other emerging markets as well. So, it should be a reasonably good year.”
Despite concerns about relatively high valuations, market participants are confident that sustained inflows will support premium valuations. Saurabh Mukherjea of Marcellus Investment Managers said that the next 12 months will mainly involve foreign investors reentering this market and assessing the potential of large-p investments.
According to HSBC, India is notably highlighted as a key overweight market, anticipated to undergo a significant bullish phase in the upcoming year.