Market Outlook
| Nov 30, 2024 | 1-Month |
1-Year |
|
| Rupees per Dollar | 84.49 | 84.08 | 83.40 |
| Oil (dollars per barrel) | 72.94 | 73.16 | 82.83 |
| Retail inflation (CPI) | 6.21% (Oct) | 5.49% | 4.87% |
- India’s GDP growth for Q2 FY2025 came in significantly lower than expected at 5.4%. The slowdown was primarily driven by weaker manufacturing growth, reduced urban demand and a decline in general government expenditure
- The CPI for October 2024 breached the upper end of the RBI’s inflation tolerance band of 6%, printing a 14-month high of 6.21% - largely driven by elevated food prices (particularly vegetables and edible oil)
- The US Federal Reserve (Fed) cut its policy rate by 25 basis points to the 4.50%-4.75% band. The Fed noted that the tightness in job market had eased, while inflation continued to move towards the 2% target. However, the minutes of the policy meeting indicated a gradual easing approach in the future
- The Bank of England also cut its policy rate by 25 basis points to 4.75%
- We remain ‘neutral’ on the outlook for bond markets
- While economic growth seems to have slowed down significantly, headline CPI above the RBI’s target band and the pressure on the Rupee could mean that the first RBI rate cut could occur in February 2025. Since liquidity conditions have tightened due to the RBI’s heavy foreign intervention and currency leakages, we expect the RBI to introduce some liquidity easing measures
- Bond markets are likely to remain supported, given favorable demand-supply dynamics. We expect the 10-year G-sec yield to trade in a range of 6.60%-6.80% in the near term
| Index | 1 month (%) | 1 year (%) | 3 years (%) |
|---|---|---|---|
| NIFTY50 | -0.3 | 19.9 | 12.4 |
| BSE100 | 0.1 | 23.3 | 13.8 |
| NIFTY500 | -0.01 | 26.1 | 15.7 |
| NIFTY Midcap100 | 0.5 | 31.4 | 23.9 |
At November 30, 2024
Nifty was down 0.31% for the month of November 2024
- Markets remained volatile amidst the outcomes of the US Presidential & India State elections, as well as moderating economic growth
- FIIs continued to sell while DIIs remained buyers during the month
- The Technology/Capital Goods sectors outperformed whereas the Insurance/Infrastructure sectors underperformed
Our outlook remains cautious in the short term and positive in the medium term
- US policy uncertainty and geopolitical risks could impact growth and capital flows
- Q2-FY2025 was the second consecutive quarter of muted earnings growth
- Weak government capital expenditure in H1 FY2025, moderation in credit growth and mixed corporate commentary on consumer demand
- The Nifty’s P/E at 23x for FY2025E and 20x for FY2026E is trading near to 5-year average
In the medium term, we expect certain important drivers for growth:
- Corporate leverage is at a decadal low placing the corporate sector on a strong footing
- India boasts strong and sustainable macroeconomic framework with a competitive advantage in services, a focus on manufacturing, increase in consumption and favourable demographics
Market consensus for Nifty earnings CAGR over FY2025-FY2027 at 13%
COMP/DOC/Dec/2024/1112/7827
