In the dynamic landscape of investment, the primary objective is to achieve returns that surpass the rate of inflation, all while considering the impact of taxes on the overall investment strategy. In the spotlight of the year 2023, Bitcoin has emerged as a standout performer, overshadowing traditional asset classes such as gold, equities, real estate, and bonds.
In stark contrast to the challenges faced in the previous calendar year, 2023 has proven favourable for cryptocurrencies, particularly Bitcoin. The world’s most renowned cryptocurrency has staged a remarkable comeback, boasting a 154.37% surge in 2023 that contributed a substantial $530 billion to its market capitalisation.
This is a noteworthy turnaround from 2022, when Bitcoin witnessed a significant 65% dip amid tightening monetary policy and a series of blowups that exposed high counterparty risk.
Bitcoin price has jumped $25,506 in 2023, reaching $42,208, according to CoinDesk prices. The highest level of this digital currency was hit in November 2021, when it topped $67,802.
Also Read: Bitcoin Jumps 160% in 2023 amid roller coaster ride; What lies ahead for cryptocurrencies?
At the outset of 2023, the cryptocurrency sector faced a multitude of challenges, such as the FTX and TerraLuma debacle, regulatory scrutiny, legal actions against prominent exchanges, and the closure of doors by several nations due to concerns about relinquishing economic control to private currencies, which cast a cloud of negativity over the market.
Amidst these hurdles, savvy investors, particularly large asset-backed institutional players like BlackRock, Fidelity, Valkyrie, and others, seized the opportunity.
Let’s look at the performance of other major asset classes in 2023:
Equities: A record year
The Indian market saw a remarkable rally in 2023, with key benchmark indices -Nifty 50 and S&P BSE Sensex – gaining 20%. The surge can be attributed to robust participation from retail investors and sustained Foreign Portfolio Investor (FPI) inflows, propelling frontline indices to break multiple record highs.
The most significant phase of the market rally unfolded between November and December, following the BJP’s victory in three crucial state elections. This outcome signalled the potential return of the NDA in the 2024 general elections.
Additionally, a pause in US Federal Reserve rate hikes, coupled with indications of a 75-basis-point rate cut in 2024, contributed to positive sentiment among investors. The upbeat mood was further bolstered by India’s robust economic growth of 7.6% in the September quarter, solidifying its status as the fastest-growing economy in the world.
2023’s impressive rally propelled the market capitalisation of NSE-listed stocks to surpass the $4 trillion mark for the first time on December 01. As of December 29, the market capitalisation reached $4.3 trillion, bringing India’s equity market closer to Hong Kong, which is currently valued at $4.7 trillion.
Also Read: Will the Indian market continue its strong run? Here’s where experts see Nifty by 2024-end
Meanwhile, mid- and small-cap stocks have witnessed an exceptional surge, with a majority of stocks delivering multi-bagger returns and some even exceeding 500% returns. The Indian IPO market has also been a wealth creator, with many IPOs debuting at substantial premiums on the opening day, contributing to the overall vibrancy of the market.
In contrast to the stellar rally in Indian stocks, China delivered a negative return in 2023 due to real estate woes and the country’s ongoing recovery from the COVID-19 pandemic. Another major peer, Hong Kong, also delivered a negative return in 2023.
Gold: Shone brightly
Gold, a traditional asset known for its resilience during economic and geopolitical uncertainty, gained sharply in 2023, marking a significant turnaround from two consecutive years of underperformance. The precious metal recorded a gain of 13.16% in 2023 to $2062 per ounce and reached a record high of $2135 on December 4th.
Multiple catalysts fueled this remarkable ascent, including geopolitical tensions, central bank actions, fluctuations in the dollar index and US yields, and the recent Israel-Hamas war, which also boosted demand for the safe haven asset, and expectations for interest rate cuts have provided further support.
Also Read: Gold and silver outlook 2024: Motilal Oswal lists four key factors that may influence prices in 2024
“Central banks purchased around 800 tonnes of gold over the first three quarters of 2023, 14% ahead of the same period last year, according to data from the WGC. Last year, global central banks purchased a record 1,136 tonnes of gold, compared to 450 tonnes bought in 2021, mostly driven by a flight towards safer assets amid soaring inflation. Last year was not only the thirteenth consecutive year of net purchases but also the highest level of annual demand on record back to 1950,” said domestic brokerage firm Motilal Oswal in its latest report.
Real Estate: A year of robust growth
The Indian residential real estate space witnessed a healthy demand in 2023 due to various factors, such as a pause in rate hikes, increased buyer interest, and rising rental costs. As various reports suggest, residential property values in the country’s top six cities increased by 10-15% in 2023, representing the highest capital appreciation rates witnessed in a decade.
Despite the substantial increase in property prices and a surge in mortgage rates, the housing sector experienced a remarkable surge. According to recent data released by real estate consultant Anarock, housing sales in the top seven cities rose by 31% in 2023, reaching an all-time high of nearly 4.77 lakh units.
This, in comparison with the 2022 figure of 3,64,870 units, underscores the robust growth and sustained momentum in the Indian residential real estate sector.
Anarock Chairman Anuj Puri said, “2023 has been phenomenal for the Indian housing sector, despite global headwinds, rising domestic property prices, and interest rate hikes over the first half of 2023.”
Puri said it was widely expected that rising property prices and interest rates, along with global market uncertainties, would impact residential sales, but high demand sustained.
Debt: Higher volatility
Bonds typically operate as one of the safest and least volatile assets globally, offering a stable income stream and acting as a hedge against the risks associated with stocks. However, bonds experienced significant volatility in 2023, driven by geopolitical tensions in the Middle East, a pause in rate hikes, and open market operation (OMO) announcements by the RBI.
Also Read: As the bull run continues, it is time to exercise caution, say experts
The increase in yields had an impact on returns from debt instruments, with the price of bonds decreasing as yields rose. Nevertheless, the RBI’s decision to pause rate hikes had positive implications for debt investments, as a decline in interest rates tends to enhance the value of debt securities. Debt funds managed to generate returns ranging between 6.5% and 7% in 2023.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
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