The Year That Was, The Year That Will Be

2023 will undoubtedly be remembered as a year which saw the cementing of multiple narratives. Not only did geopolitics become an integral part of our lives as opposed to a contained event, it also made a higher for longer rate cycle a certainty. And the world saw AI embed its presence in everyone’s mind and life.

2023 also brought out conflicting investing trends in play—while value triumphed growth, the gains in the U. S. markets wer.

. . 2023 will undoubtedly be remembered as a year which saw the cementing of multiple narratives.

Not only did geopolitics become an integral part of our lives as opposed to a contained event, it also made a higher for longer rate cycle a certainty. And the world saw AI embed its presence in everyone’s mind and life. 2023 also brought out conflicting investing trends in play—while value triumphed growth, the gains in the U.

S. markets were contained to the top 8-10 stocks for a better part of the year, and markets like India kept on finding favour with investors despite being expensive to markets like China. 2023 also saw central banking efforts to tame inflation see some light at the end of the tunnel, and credit is due to banks that they successfully managed to do so without causing any collateral damage to the markets or the economy.

And while 2023 was a year in which we witnessed the collapse of one of the largest European banks and it had no repercussions on the global economy, we also saw the resurgence of the crypto trade. After correcting 71% from November 2021 to November 2022, Bitcoin had a remarkable 158% move in 2023, ending the year as the most successful asset class. While crude was in focus because of coordinated OPEC+ action amidst solid geopolitical stress, the gains in crude prices could not be sustained due to a slowing world.

Similarly for gold, which rallied because of the geopolitical stress in the world, but has seen gains capped at under 20%. Emerging markets may have had an indifferent year, but markets like Brazil and India had a strong run. These markets will be keenly watched out for, especially as China in the EM landscape has become uninvestible.

Indian markets—in particular—had a great move, but it was neither the best performing emerging market, nor was it the best performing Asian market. Those titles went to Brazil and Japan, respectively. However, 2023 will be remembered for the stellar performance of the mid-cap and small-cap indices versus the large caps.

While the Nifty delivered circa 19% returns, the mid-cap and small-cap indices have gained 44% and 46%, respectively. The year marked the fall and subsequent rise in the share prices of the Adani Group, as also a year of some large debutants in the Indian landscape. In some sense, 2023 also showed how swiftly can the ranks change when the fortunes for the Adani Group turned with investments from marquee investors like GQG and from the U.

S. government into Adani Ports’ project in Sri Lanka. And it showed that being marquee does not guarantee success.

The listing of the first IPO in 20 years from the stable of the Tata Group (Tata Technologies Ltd. ) was a strong success and Reliance Industries Ltd. ’s value unlocking through Jio Financial Services Ltd.

was a big event. However, a clutch of debutants scored over these names as large wealth creators post-listing. Speaking of debuts, 2023 will certainly be remembered as the year of the primary markets.

And more infamously, IPOs in the SME space. Out of over 150 companies that hit the primary markets in the SME space, 51 companies hit subscription levels of over 100 times and 12 of those hit subscription levels of over 300 times! If this is not exuberance, then I do not know what is. People joked about how the existing companies should delist themselves and relist them for better valuations.

A logistics company received subscription for Rs 10,100 crore against the IPO size of Rs 32 crore. Another SME IPO received Rs 18,800 crore worth of bids against an IPO size of Rs 78 crore. And the most subscribed IPOs were not oversubscribed ‘merely’ 100-200 times.

Kahan Packaging was subscribed 730 times. Speaks of the mania in the markets in 2023. For 2024, the possibilities are enormous.

The world will have to get used to higher-for-longer interest rates in a falling interest rate year. It will have to get used to political change in multiple countries, even as it tries to latch on to the slightest hint of political stability. And it will have to get used to higher valuations for quality, as predictable quality growth in a world which is faltering will be very highly valued.

We have seen risk assets climb a wall of worry in 2023, but questions will be asked about the valuations of some of the asset classes and geographies. More stronger questions around markets like India and Brazil, in light of the extreme underperformance of markets like China, would arise. And while the questions around politics and conflicts will only get louder and more shrill in the year, the biggest question to my mind is how would corporates and investors align themselves to the reality of higher interest rates equating to lower IRRs and lower multiples.

That is the single biggest question that might find its answers in 2024. From my perspective, 2023 was a year of a very big loss. For the investing world certainly, because there will never be another like Charlie Munger.

The annual pilgrimage at Omaha for the Berkshire Hathway annual meet will never be the same again. Nor will we get more wisdom from the brilliant mind of Munger. The solace—Poor Charlie’s Almanack will always be at the bedside table.

Charlie Munger—you shall be missed. Wishing him—wherever he is—a happy 2024. Wishing us all a year of peace, joy and common prosperity.

Niraj Shah is Executive Editor at NDTV Profit. Disclaimer: New Delhi Television is a subsidiary of AMG Media Networks Ltd. , an Adani Group company.

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