Category: Market Outlook

December was a strong month for equity markets globally in what is usually termed as a “Santa Claus” rally. Indian markets emerged as the best-performing market with benchmark Nifty gaining a strong 7.9%. The RBI, as expected, maintained the status quo on rates and kept their stance unchanged, while the Fed held rates at 5.25%-5.5% for a third straight time and laid out the timeline for rate cuts in 2024. 

Market Outlook

Indian markets are entering CY24 on a high note and with a high base. India has been amongst the best performing markets and is at all time high levels. Crude oil prices have also corrected below $80 per barrel, despite the war in West Asia. We believe that a combination of higher US shale oil production, benign demand growth, attractive renewable energy prices and huge innovation related disruption like EVs, hydrogen, etc.; will ensure that oil prices stay meaningfully soft over the medium to long term.

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November was a strong month for equity markets globally. After having hit a worrying high of 5%, the US 10-year yield came off sharply, leading to a risk on. US equity markets represented by Dow and S&P500 surged 7%-9% while equity markets in Brazil, South Korea, and Germany also recorded double digit gains. In line with the global markets, Indian equities too had a strong month, with NIFTY50 gaining 5.5%. Mid and small caps saw stronger gains with S&P BSE Midcap and S&P BSE 250 SmallCap being up by over 9% each. It was a broad-based rally with all sectoral indices ending in green. Reality, oil & gas, and healthcare gained 18%, 13% and 11% respectively. After two months of selling, Foreign Portfolio Investors (FPIs) turned positive with net inflows of USD 1.1 billion in Indian equities. Domestic Institutional Investors (DIIs) saw continued net inflows of USD 1.7 billion. Aiding India’s performance were strong economic numbers along with global rating company S&P upgrading India’s GDP forecast.

Market Outlook
Indian economy has been very resilient last couple of years despite the growing challenges faced by the world. The 7.6% print for GDP growth reported for the last quarter has only reinforced the fact that India should be the fastest growing large economy in the world for the next few years. The strong win for the ruling party in the just concluded state elections has also reinforced the views that there will be continuity of the Modi government for the third term in the elections to be held in 2024. Corporate earnings have trended better than expected, providing fundamental support to the markets.

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The month of October turned out to be a challenging month for global equity markets. The Israel-Hamas conflict, rising US bond yields, and concerns about slowdown in consumer demand; all contributed to a risk-off. In line with the global markets, NIFTY50 was also down 2.8% for the month, while broader markets S&P BSE Midcap and S&P BSE 250 SmallCap were down by 3.4% and 2.7% respectively. All sectoral indices declined, except Real-estate that gained 3.7%. Foreign Portfolio Investors (FPIs) reported net outflows of approximately USD 2.9 billion in October’23, while Domestic Institutional Investors (DIIs) saw net inflows amounting to USD 3.0 billion.

Market Outlook
Along with global volatility, Indian markets were also impacted and vindicated our stance that risks to Indian equities are more from global factors than local issues. On the global macro-economic front, the US FED left the rate unchanged in early November, though it voiced concerns that job gains are still strong, and inflation is still elevated. This led to US 30-year yields cooling off a bit to almost 4.64%, triggering a mini risk-on and the USD is weakening. After the initial spike post the West Asia conflict, crude prices too have corrected and are now hovering around USD ~85/ bbl. We expect inflation in US to cool off materially due to a correction in prices of all commodities as also recent correction in real estate prices. This should allay fears of yields rising from here. Global geopolitical concerns though continue to be a key monitorable. 

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