Market Outlook
| May 30, 2025 | 1 Month |
1 Year |
|
| Rupees per Dollar | 85.58 | 84.50 | 83.32 |
| Oil (dollars per barrel) | 63.90 | 63.12 | 81.86 |
| Retail inflation (CPI) | 3.16% (April) | 3.34% | 4.83% |
- The US Federal Reserve (Fed) kept the policy rate unchanged at 4.25-4.50% for third consecutive policy meeting, as was widely expected. Fed noted that the risk to both unemployment and inflation have risen and that further moves will be data dependent
- RBI announced a dividend payout of ₹ 2.69 trillion to the Government of India. This compares to a dividend payout of ₹ 2.1 trillion last year and is even higher than the budget estimate
- India's Q4-FY2025 GDP growth came in stronger at 7.4% yoy, much higher than the estimated 6.8% yoy
- We remain ‘neutral’ on the outlook for bond markets
- Lower than expected inflation outcome and inflation well below the RBI’s target of 4%, we expect the RBI to cut the policy rate by 25bps in the upcoming monetary policy meeting. Given the large dividend transfer by RBI, the durable liquidity is expected to increase above ₹ 5 trillion which will be supportive for the short-medium term segment. We expect the 10 year G-sec yield to trade in a range of 6.15%-6.30% in the near term
| Index | 1 month (%) | 1 year (%) | 3 years (%) |
|---|---|---|---|
| NIFTY50 | 1.7 | 9.9 | 14.3 |
| BSE100 | 2.2 | 9.1 | 15.4 |
| NIFTY500 | 3.5 | 8.0 | 17.3 |
| NIFTY Midcap100 | 6.1 | 11.1 | 26.6 |
At May 30, 2025
Nifty was up 1.7 % for the month of May 2025
- After wavering earlier in May due to geopolitical conflict, markets later rebounded
- Within BSE 100 index, amongst sectors Real Estate/Capital Goods outperformed while Cement/Consumer underperformed the broader market
Our outlook has changed to neutral in the short term while it remains positive in the medium term
- Global growth and inflation challenges could act as headwinds for markets
- Nifty’s earnings growth was muted in Q4-FY2025 while in line with expectation
- However, flows in the market remain steady
- The Nifty’s P/E, at 22x for FY2026E, is above its 5-year average
In the medium term, we expect certain important drivers for growth:
- Domestic policy pivot has shifted in favour of ‘growth’ (CRR cut, rate cut, liquidity infusion, lower risk weights and tax cuts)
- India benefits from structural levers in the form of demographic benefits, rising formalisation, manufacturing focus and digitisation
- Corporate balance sheets remain strong which positions them well for the next leg of growth
- Earnings trajectory will be key monitorable over medium term
Market consensus for Nifty earnings CAGR over FY2025-FY2027 at 10%
COMP/DOC/Jun/2025/66/0425
