Market Outlook
| Jan 31, 2025 | 1-Month |
1-Year |
|
| Rupees per Dollar | 86.62 | 85.61 | 83.04 |
| Oil (dollars per barrel) | 76.76 | 74.64 | 81.71 |
| Retail inflation (CPI) | 5.22% (Dec) | 5.48% | 5.69% |
- CPI for December 2024 declined to 5.22% down from 5.48% - primarily driven by a sharp fall in food prices.
- The US Federal Reserve kept the policy rate unchanged at 4.25-4.50%, after cutting rates by 100 bps in the second half of 2024. The continued strength in the US economy combined with a strong labour market provided them the space to take a pause and evaluate the impact of Trump’s policies on tariffs and tax cuts. The European Central Bank (ECB) cut its policy rates by 25 bps to 2.75%.
- We remain ‘neutral’ on the outlook for bond markets
- In the annual budget, the government announced a fiscal deficit target of 4.4% of GDP for FY 2026, against a revised 4.8% of GDP for FY 2025. Gross market borrowing came at ₹14.82 lakh crores with the net market borrowing at ₹11.54 lakh crores for FY 2026. This was higher than market expectations
- United States announced tariffs on Canada (25%), Mexico (25%) and China (10%) following the original threat made in November. This pushed the Rupee to depreciate further to an all time low of ₹ 87.29 against the dollar
- Considering the government stuck to its path of fiscal consolidation, it has opened up space for the RBI to begin its rate cut cycle. Bond markets are likely to remain supported, given favourable demand-supply dynamics
| Index | 1 month (%) | 1 year (%) | 3 years (%) |
|---|---|---|---|
| NIFTY50 | -0.6 | 8.2 | 10.7 |
| BSE100 | -1.7 | 9.4 | 11.8 |
| NIFTY500 | -3.6 | 9.0 | 13.1 |
| NIFTY Midcap100 | -6.1 | 10.6 | 21.1 |
At January 31, 2025
Nifty was down 0.6 % for the month of January 2025
- Markets remained subdued on weak sentiment
- FIIs turned seller during the month while DIIs continued buying
- Within BSE 100 index, amongst sectors Chemical/Insurance outperformed while Retail/Real estate 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 could impact growth and capital flows
- Q3-FY2025 earnings season has been muted so far
- Support to consumption demand from the government through tax cuts in the budget while limitations on government capex growth visible
- 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:
- Lower leverage and better return ratios place the corporate sector on a strong footing
- India benefits from structural levers in the form of demographic benefits, rising formalisation, manufacturing focus and digitisation
- Key monitorable will be earnings trajectory
Market consensus for Nifty earnings CAGR over FY2025-FY2027 at 14%
COMP/DOC/Feb/2025/52/8349
