Market Outlook
| March 31, 2024 | 1-Month |
1-Year |
|
| Rupees per Dollar | 83.40 | 82.91 | 82.18 |
| Oil (dollars per barrel) | 87.48 | 83.62 | 79.77 |
| Retail inflation (CPI) | 5.09% (Feb) | 5.10% | 6.44% |
- US Federal Reserve (Fed) left its policy rate unchanged at 5.25-5.50% for the fifth straight meeting and indicated that the timing of rate cuts will depend on inflation sustainably moving toward the Fed’s target of 2%. Bank of Japan (BoJ) surprised the markets by increasing its policy rate to 0-0.1%, ending the era of negative interest rates. Swiss National Bank (SNB) reduced its policy rate by 25 bps to 1.5%, the first major central bank to ease monetary policy
- The government announced the borrowing calendar for H1 FY2025 - 53.1% of the budgeted gross dated securities borrowings of ₹ 14.1 trillion. This planned borrowing of ₹ 7.5 trillion is the lowest H1 borrowing since FY2019 and is likely to be supportive for bonds
- We remain ‘neutral’ on the outlook for bond markets. We expect RBI to hold the policy rate at 6.50% at least until the Fed begins its monetary easing cycle (markets are expecting the first cut from the Fed in June or July). The lower H1 borrowing calendar along with the global bond index inclusion flows beginning from June, has improved the demand supply dynamics in favor of bonds. We expect the yield curve to steepen given favorable liquidity conditions and higher supply at the longer end of the curve. Markets are likely to take cues from global monetary policy actions, US yields and crude oil prices
| Index | 1 month (%) | 1 year (%) | 3 years (%) |
|---|---|---|---|
| NIFTY50 | 1.6 | 28.6 | 16.6 |
| BSE100 | 1.6 | 32.3 | 17.7 |
| NIFTY500 | 0.8 | 39.1 | 19.7 |
| NIFTY Midcap100 | -0.5 | 60.1 | 28.1 |
At March 31, 2024
Nifty was up 1.6% for the month of March 2024
- Positive development in Japan/China and domestic macro kept the sentiment buoyant
- FIIs remained buyers while DIIs continued buying to the tune of $ 6.75 billion
- Capital Goods/Telecom outperformed while Technology/Infrastructure underperformed
Our outlook remains Neutral in the short term and Positive in the medium term
- The broader India macro environment remains resilient however select sectors may see downgrades in the coming quarter
- Policy continuity appears priced-in by the markets. Incremental drivers will be Fed rate cutting cycle, RBI liquidity and domestic flows
- We note that the Nifty P/E at 21x FY2025E is marginally higher as compared to 5 year mean however India’s premium to EM peers remains very high
In the medium term, we expect certain important drivers for growth:
- Amidst the global uncertainties of growth, India's long-term growth prospect remain robust
- India’s medium term outlook remains favourable as bond index inclusion, fiscal consolidation and reforms are likely to spur economic growth
Nifty earnings CAGR over FY2024-FY2026 is expected to be 12%
COMP/DOC/Apr/2024/84/5814
