Market Outlook
| May 31, 2024 | 1-Month |
1-Year |
|
| Rupees per Dollar | 83.47 | 83.44 | 82.73 |
| Oil (dollars per barrel) | 81.62 | 87.86 | 72.66 |
| Retail inflation (CPI) | 4.83% (Apr) | 4.85% | 4.70% |
- RBI paid a record dividend of ₹2.11 trillion to the central government, more than double the ₹1.02 trillion factored into the interim budget for FY2025
- Standard & Poor’s (S&P) raised India's sovereign rating outlook to 'positive' from 'stable' while retaining the rating at 'BBB-' on the back of robust economic growth and fiscal consolidation
- GDP growth for Q4 FY2024 came in at 7.80% backed by strong investment demand
- Contrary to exit polls and market expectations, the BJP fell short of a majority by securing only 240 seats, marking a sharp fall from the 303 seats in the previous elections. This has increased the possibility of higher revenue expenditure in the final budget for FY2025. Focus would now shift towards rural development with increased government spending which may lead to higher inflation
- We remain ‘neutral’ on the outlook for bond markets
- From the monetary policy perspective, we expect RBI to hold the policy rate at 6.50% at least until Q3 FY2025
- With global bond index inclusion beginning from this month, FPI flows should be supportive for bond yields. The next trigger for the markets would be the cabinet formation and final budget for FY2025 expected in mid-July
| Index | 1 month (%) | 1 year (%) | 3 years (%) |
|---|---|---|---|
| NIFTY50 | -0.3 | 21.5 | 13.1 |
| BSE100 | 0.1 | 25.6 | 14.5 |
| NIFTY500 | 0.5 | 33.7 | 16.8 |
| NIFTY Midcap100 | 1.6 | 53.0 | 26.1 |
At May 31, 2024
Nifty was down 0.33% for the month of May 2024
- Markets were down marginally amid increased volatility due to elections
- FIIs continued selling during the month while DIIs remained buyers
- Capital Goods/Metals & Minerals outperformed while Chemical/Real Estate underperformed
Our outlook remains Neutral in the short term and Positive in the medium term
- A surprise verdict but with coalition government at the helm, the market now sensing macro stability and policy predictability
- Q4-FY2024 earnings season was broadly in line with expectations with pockets of weakness in some sectors continuing
- The broader India macro environment remains resilient
- We note that the Nifty P/E at 21x FY2025E is marginally higher as compared to 5 year mean with India continuing to trade at a premium to emerging markets
In the medium term, we expect certain important drivers for growth:
- India's growth prospects remain robust given the uncertain global growth environment
- Structural growth drivers for India remain in place in the form of demographic benefits, investments focus, policy reforms and digitisation
Nifty earnings CAGR over FY2024-FY2026 is expected to be 14%
COMP/DOC/Jun/2024/126/6322
