Market Outlook
| Dec 31, 2024 | 1-Month |
1-Year |
|
| Rupees per Dollar | 85.61 | 84.70 | 83.32 |
| Oil (dollars per barrel) | 74.64 | 71.83 | 75.89 |
| Retail inflation (CPI) | 5.48% (Nov) | 6.21% | 5.55% |
- The CPI for November 2024 moderated to 5.48% down from 6.21% - primarily driven by softening of food prices, which have begun to normalize from their elevated levels
- The US Federal Reserve (Fed) cut its policy rate by 25 basis points to the 4.25%-4.50% band. Policymakers now anticipate just two rate cuts of 25bps each in 2025, compared to the 100bps of reductions as projected in the previous quarter
- We remain ‘neutral’ on the outlook for bond markets
- RBI released the borrowing calendar of state development loans (SDL’s) for Q4 FY25 – and the supply was set at ₹4.73tn (as against market expectations of around ₹4.2-4.3tn, and 4.13tn in Q4 FY24). The SDL supply has always remained elevated in the last quarter as seen in the past trends, though the actual borrowing has been lower than scheduled. We expect the spreads to widen further in the Jan-Mar quarter given heavier supply
- Rupee depreciated by 2.9% in 2024 and was one of the least volatile currencies due to continued RBI intervention. Since October 2024, the RBI has intervened heavily to limit the depreciation (estimated to be close to $40-45 billion). However, RBI recently loosened its grip on the rupee and volatility is expected to rise going forward
- Bond markets are likely to remain supported, given favourable demand-supply dynamics
| Index | 1 month (%) | 1 year (%) | 3 years (%) |
|---|---|---|---|
| NIFTY50 | -2.0 | 8.8 | 10.9 |
| BSE100 | -1.9 | 12.0 | 12.4 |
| NIFTY500 | -1.4 | 15.2 | 14.3 |
| NIFTY Midcap100 | 1.4 | 23.9 | 23.4 |
At December 31, 2024
Nifty was down 2.0 % for the month of December 2024
- Markets remained volatile due to global uncertainties
- DIIs continued buying during the month along with FIIs, who turned marginal buyers
- Within BSE 100 index, amongst sectors while Pharmaceuticals/Retail outperformed, Capital Goods/Oil & Gas sectors underperformed the broader market
Our outlook remains cautious in the short term and positive in the medium term
- US policy uncertainty and geopolitical risks continue to impact growth and capital flows
- Favourable monsoons, improving rural wages is supporting rural growth
- Q3-FY2025 earnings season may see a sequential improvement but may fall short of expectations
- The Nifty’s P/E at 22x for FY2025E and 19x for FY2026E is trading near its 5-year average
In the medium term, we expect certain important drivers for growth:
- India remains well poised for sustained growth through structural levers in the form of investment focus, demographic benefits, and digitisation
- Corporate leverage is at a decadal low placing the corporate sector on a strong footing
- Key monitorable will be policy direction and earnings trajectory
Market consensus for Nifty earnings CAGR over FY2025-FY2027 at 13%
COMP/DOC/Jan/2025/61/8084
