The Nifty 50 index is headed for its best calendar year performance in three years with gains of 21% so far in the first nine months of 2024.

The 50-stock benchmark index had gained 20% in 2023 as well, while the index delivered single-digit returns in 2022, with gains of 4.3%.

There has not been a calendar year since 2015 when the Nifty has delivered negative returns. The index had declined 4% in 2015.

However, this ongoing rally in the benchmark index is not propelled by the heavyweights this time as well.

India’s second-;argest private lender ICICI Bank contributed the most with 526 points, Bharti Airtel contributed 447 points to the upside, while Mahindra & Mahindra has a contribution of 317 points so far this year, out of the 4,500 points that the Nifty has gained in 2024 so far.

Even this year, HDFC Bank’s shares have not contributed to the Nifty rally, despite having among the largest weightage on the index. The recent rally in the stock may have propelled it to turn positive for 2024, but the 4% gain still classifies it as an underperformer in comparison to the Nifty surge. HDFC Bank shares had gained 5% in 2023 and had underperformed the Nifty too.

With this surge, India has now become the most expensive equity market in the world. In comparison, South Korea’s Kospi is down 2% in US Dollar terms, while other emerging markets like Jakarta Composite and Philippines’ benchmark have gained 8.1% and 14.4% respectively. The Taiwan TAIEX has gained 22.3% so far in 2024.

According to Jefferies, India remains one of the best long term story even though unsustainably high flows from domestic retail investors and institutions into stocks may create some volatility in the near-term. “India remains one of the best long-term equity market opportunities though near-term can be volatile due to unsustainably high domestic flows,” said Mahesh Nandurkar, India Strategist at Jefferies. India being the best long-term story over the next decade has also been echoed by Jefferies’ global equity strategiest Chris Wood, in multiple previous interactions with CNBC-TV18.

The Nifty 50 is currently trading at 21.5 times its one-year forward earnings whereas the KOSPI commands a valuation of 8.8 times. That compares with 16.8 times for Taiwan TAIEX and about 14 times for Jakarta Composite.

While domestic investors continue to dominate the market with massive inflows, participation from foreign portfolio investors (FPIs) have been tepid due to expensive valuations. So far in 2024, the FPIs have bought $11 billion worth of shares. In comparison, the local investors have purchased shares worth almost $40 billion during the same period.

“Valuation is a key concern for FPIs but willingness to explore new ideas from industrial and capex segment was visible” added Nandurkar.