Profit-taking marked the last session of a record-breaking 2023 on the stock markets as investors cashed in on some of their bets after a five-day winning run.

The 30-share Sensex slipped over 170 points to 72240.26, while the Nifty lost 47.30 points or 0.22 per cent to settle at 21731.40.

A lacklustre end to an electrifying year — that was marked by huge gains in the smallcap and midcap universe — has not deterred optimism among market mavens who feel stocks will continue to advance in 2024 and hit new lifetime highs.

Investors are expecting robust FPI inflows as the US Federal Reserve and other central banks begin to cut interest rates.

A stable government at the Centre is expected to fuel the bull run in the markets.

The year saw the Sensex jumping 11399.52 points or 18.73 per cent — the second-best year after 2017 when it had zoomed nearly 30 per cent.

During the year, the Nifty shot up slightly over 20 per cent compared with a 30.28 per cent gain in 2017.

A distinctive feature was the clear outperformance of small and midcap stocks as reflected in the S&P BSE smallcap gauge which vaulted 13746.97 points or 47.52 per cent while the midcap index added 11524.72 points or 45.52 per cent.

The gains in midcap and its smallcap peers were one reason behind a whopping Rs 81.90 lakh crore being added to investor wealth this year.

While the BSE reached the $4 trillion milestone for the first time on November 29, the market capitalisation of all the companies listed on the bourse jumped Rs 81.90 lakh crore to reach an all-time high of Rs 364.28 lakh crore.

Stocks sizzled in 2023 despite volatile behaviour from foreign portfolio investors (FPIs). They were net sellers for the first two months of the year and then went into a buy mode for the next six months.

After again offloading stocks for two months, the FPIs returned to the Indian markets in the last two months of the calendar year.

Analysts attributed the record run of stocks to retail investors who placed their trust in mutual funds. The other enabling factors were a resilient economy and sound corporate earnings. Further, the recent win of the BJP in three states and guidance from the US Fed that there will be three cuts in 2024 has provided a booster dose to equities.

``The Indian corporate earnings began showing improvement, with companies benefiting from a softening in commodity prices, leading to enhanced profitability and margins,” Mahavir Lunawat, MD of Pantomath Capital Advisors Pvt Ltd, said.

“Companies are expected to continue the strong performance in the upcoming quarters, driven by a robust domestic demand environment, positive macroeconomic factors and private capex revival.’’

The BSE Sensex, which made monthly gains in eight months, reached its all-time high of 72484.34 on December 28 after hitting a 52-week low of 57084.91 on March 20.

Prashanth Tapse, Senior VP (Research), Mehta Equities, pointed out that while select bouts of profit-booking could be seen going forward, the undertone remains bullish on the back of strong macro factors and renewed FII buying in the wake of sliding US bond yields.