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Author: Mayank Mehta

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The World Turns Inward – 2025 Outlook

It is with great pleasure that we present the third edition of our Annual Outlook. This edition ‘The World Turns Inward’ is inspired by how geopolitics is reshaping the global landscape.

 

The Trump is back in the White House and his focus is on “Making America Great Again” through the use of tariffs and prioritizing local manufacturing. Many countriesare now grappling with their own domestic challenges. The U.S. faces an all-time high debt of $36 trillion, while China struggles with economic growth issues and risingyouth unemployment. The Russia-Ukraine war shows no signs of resolution, and the Middle East continues to experience regional rivalries, with players like Saudi Arabia, the UAE, and the Qatar focusing on transforming into tourism hubs. Japan, Singapore, and several European nations are contending with rapidly agingpopulations. Meanwhile, neighbouring countries- Afghanistan, Sri Lanka, Pakistan, and Bangladesh face significant political and economic uncertainties, shifting the focus of almost every country inward rather than prioritizing broader regional or global development.

 

As we look ahead, 2025 promises to be a year of challenges and uncertainties on a global scale.

 

However, irrespective of global fluctuations, it remains undeniable that India will continue to be the fastest-growing major economy in 2025 and is poised to surpass Japan to become the world’s fourth-largest economy.

 

We deeply value the trust and partnership you have shown over the past 34 years and remain committed to providing you with the best services in the years to come.

Global Macros

 

United States

 

AI-Driven Growth: The US economy expanded by 2.7% in 2024, propelled by a robust job market, strong consumer spending, and significant advancements in AI. Continued AI adoption is boosting productivity and fueling corporate growth, with substantial investments anticipated throughout 2025.

 

Monetary Policy: The Federal Reserve continued its easing cycle, implementing a 25-basis-point interest rate cut in December 2024. This marked the third consecutive reduction, bringing the target range to 4.25%-4.5%.

 

Cryptocurrency Market: The SEC’s approval of Bitcoin and Ethereum ETFs triggered a significant rally in cryptocurrency markets.This landmark decision signals increased mainstream acceptance of digital assets, particularly with the Trump administration expressing support for their development. Bitcoin’s value surged over 120% in 2024, following a remarkable 151% return in 2023

 

Tech Dominance: The “Magnificent 7” –Apple, Microsoft, Alphabet, Amazon, Tesla, Nvidia, and Meta – collectively contributed more than half of the S&P 500’s returns in 2024, achieving a 65% year-over-yearincrease.

 

National Debt: The US national debt reached a staggering $36.13 trillion by December 2024, translating to a per capita debt of approximately $107,888.

Europe & UK

 

Monetary Policy: The European Central Bank(ECB) and the Bank of England (BoE) maintained a cautious approach to monetary policy, prioritizing inflation control while supporting economic growth.

 

Economic Growth: Eurozone GDP growth remained modest at 1.2% in 2024, with varying performance across member states. The UK faced significant economic challenges, including high inflation, leading to economic stagnation.

 

China:

 

China’s economic landscape in 2024 was marked by persistent challenges. The realestate crisis continued to weigh heavily onthe economy, with a significant decline in new house prices. Government stimulus efforts, aimed at stabilizing the property sector, failed to significantly boost consumer confidence, which remained at near-record low levels.

 

As per Rhodhium Group, China’s GDP growth in 2024 was 2.8%, significantly lower than official claims of nearly 5%. In August 2024, Japan witnessed a significant unwinding of the yen carry trade. This popular investment strategy involved borrowing cheaply in Japanese yen andinvesting the proceeds in higher-yielding assets elsewhere. However, the Bank of Japan’s surprise decision to adjust its monetary policy and raise interest rates made borrowing yen less attractive. This triggered a mass reversal of these trades, leading to a sharp yen appreciation and increased volatility in global financial markets.

 

In 2024, Japan’s economy experienced moderate growth, with GDP expanding at an estimated 1.2%, supported by robust export demand and government stimulus measures.

 

Central bank gold buying continued to surge in 2024. Notably, the Reserve Bank of India emerged as the second-largest buyer, in 2024. This trend reflects a growing preference for gold as a safe-haven asset and a diversifier for central bank portfolios.

 

In the energy sector, Brent crude oil averaged around $80 per barrel throughout 2024. This price stability was largely attributed to production cuts implemented by the OPEC+alliance.

Domestic Macros

  • India’s foreign exchange reserves declined by $4.112 billion to an eight-month low of $640.279 billion during the week ended December 27.
  • India, the second-largest buyer of gold in 2024, increased its gold reserves to 876 tonnes.
  • Automobile retail sales grew by 9% year-on-year, driven by strong demand for two-wheelers and passenger vehicles. Total vehicle registrations reached 26,107,679 units in 2024, up from 23,928,293 units in 2023.
  • Net direct tax collection grew 16.45% year-on-year to over Rs 15.82 lakh crore, driven by higher advance tax collections.
  • The government collected Rs 21.51 lakh crore from GST between January and December 2024.
  • Capex growth slowed from 9.0% in FY24 to 6.8% in 1HFY25, primarily due to a 15% year-on-year contraction in government capex spending in the first half of the fiscal year.
  • The housing market remains robust, with inventories at their lowest level in 14 years.
  • Private corporate capex is on the rise, driven by strong corporate balance sheets and investment opportunities in sectors such as power, electrification, Production Linked Incentive (PLI) schemes, and building materials.
  • The Indian Rupee weakened by 2.8% in 2024, facing pressure from capital outflows driven by FPI withdrawals from Indian equities.
  • A record 268 successful IPOs, comprising 90 on the mainboard and 178 on the SME platform, raised Rs 1.67 lakh crore in 2024, the highest number of IPOs in Asia and in Indian history, reflecting growing investor confidence in the capital markets.
  • India’s demat account base has surged, now exceeding the population of countries like Russia, Mexico, and Japan, with over 18 crore accounts.
  • Domestic Institutional Investors (DIIs) provided a crucial counterbalance to Foreign Portfolio Investors (FPIs), consistently adding inflows and amassing a total of US$59 billion.
  • After robust inflows of US$20.7 billion in 2023, FPIs adopted a cautious stance in 2024, with modest net inflows of US$1.4 billion. Significant outflows totaling US$13.5 billion occurred in October and November.
  • SIP inflows witnessed steady growth throughout the year, rising from Rs 17,610 crore in December 2023 to Rs 25,320 crore in November 2024.
  • As of November 2024, the value of mergers and acquisitions (M&A) in India had increased 43.2% to $36.14 billion, compared to $25.24 billion in 2023. The number of deals also increased by 24.4%.
  • The RBI left the repo rate unchanged in 2024, disappointing home loan borrowers, but introduced several regulations for the benefit of bank customers.

Markets

  • Nifty 50 delivered a modest annual return of approximately 9% in 2024, supported by a 16% growth in earnings.

  • The index reached a peak of around 26,250 in September 2024 but corrected sharply in October and November, ending the year at lower levels.

  • Midcap and Smallcap indices significantly outperformed Nifty 50, with returns of approximately 24% and 27%, respectively. The gains were primarily driven by multiple expansions rather than robust earnings growth, which remained relatively muted at 8% and 6%.

  • Top-performing sectors included Realty (+31%), Pharma (+30%), Capital Goods (+26%), and Power (+26%).

  • Gold emerged as a strong performer, providing a return of approximately 19% in 2024. This was driven by robust safe-haven demand and de-dollarization trends

     

    The year was marked by heightened volatility due to geopolitical tensions, global economic weaknesses, elevated interest rates, and election-related uncertainties both in India and globally

India’s 2024 Growth: A Journey of Transformation

  • Battery electric vehicle production in India is set to reach 3,77,000 units by 2025, driven by major new model launches.

  • India’s atomic power capacity has nearly doubled from 4,780 MW in 2014 to 8,081 MW in 2024

  • India’s smartphone market is now the second largest by volume, driven by premiumization and significant year-on-year growth in value.

  • India has become the second-largest contributor to public generative AI projects on GitHub, with 108 million new repositories and 5.2 billion contributions, reflecting its rapid growth as a global tech leader.

  • India is leading the digital revolution, with financial technology driving digital payments, contributing to 10% of GDP, and expected to reach 20% by 2026, supported by robust digital infrastructure and AI talent.

  • India’s airline seat capacity is projected to grow by 12.7% in FY24 compared to pre-pandemic levels, ranking fifth globally, with countries like Saudi Arabia and UAE seeing faster recoveries.

  • India’s services exports are projected to surpass merchandise exports by 2030, driven by growth in IT services and other business services, with significant potential for expansion in underrepresented sectors.

Looking Ahead

 

The year 2025 presents a mixed outlook for the Indian economy and financial markets, driven by several domestic and global factors. Key developments and trends to watch include:

 

Macroeconomic Growth:

Consumption Revival: While urban consumption faces challenges from sticky inflation and high borrowing costs, rural consumption is showing signs of improvement, supported by a favorable monsoon and improved agricultural productivity

Capex Cycle Revival: Public infrastructure spending will sustain momentum, particularly in roads, railways, and renewable energy. The private sector is expected to contribute significantly as global supply chains increasingly shift to India

Monetary Policy: The Reserve Bank of India (RBI) is expected to initiate a rate-cutting cycle in CY25, potentially reducing rates by 25–75 bps, contingent on stable inflation. This policy shift could enhance credit availability, stimulate domestic liquidity, and support economic activity.

 

Equity Markets:

  • The Nifty 50 is trading around its long-term average, with promising upside potential driven by robust corporate earnings growth projected at a compound annual growth rate (CAGR) of ~15% between FY25 and FY27.

  • Mid and Small-Cap Stabilization: Following their strong performance in CY24, mid and small-cap indices are expected to stabilize as valuations normalize, offering selective opportunities for investors.

  • Positive sectors: Financials, infrastructure, healthcare, real estate, and consumer discretionary sectors are likely to benefit from structural reforms and recovery in demand

 

Key Global and Domestic Risks

  • Geopolitical Developments: Trade policies under the Trump administration may disrupt global supply chains. However, India’s domestically driven economy is relatively shielded from such external shocks.

  • Energy Prices: The stability of crude oil prices will be crucial for managing inflation and maintaining healthy corporate profit margins. Escalating geopolitical tensions could impact foreign capital flows and lead to volatility in energy prices.

  • Global Fund Flows:

    • Anticipated rate cuts by the U.S. Federal Reserve are likely to ease global liquidity, potentially attracting foreign investments into Indian markets.

    • However, persistent foreign institutional investor (FII) outflows in secondary markets could remain a challenge.

 

Structural Opportunities: Catalysts for Long-Term Growth

  • Manufacturing and PLI Schemes: The government’s focus on production-linked incentive (PLI) schemes and India’s emergence as a global manufacturing hub are expected to drive growth in sectors such as industrials, electronics, and capital goods.

  • Technology and Digital Transformation: Investments in digital infrastructure and advancements in emerging technologies, including semiconductors and electric vehicles (EVs), are poised to unlock significant long-term growth potential.

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Stars are aligned for India’s growth

India’s growth prospects are currently at a historic high, with several factors aligning in its favor. The country benefits from a youthful demographic, technological advancements, a thriving digital economy, and increasing foreign investments.

 

Additionally, government initiatives focused on infrastructure development, manufacturing, and renewable energy are paving the way for sustainable growth. As India continues to foster innovation and entrepreneurship, it is well-positioned to become a global economic power house in the coming decades. Below are the few factors supporting India’s growth:

Favorable Demographics:

Over 65% of India’s population is below the age of 35, providing a large and growing workforce. Median age of India’s population is approximately 28 years, compared to 38 years in China and 48 years in Japan, offering a longer window to capitalize on its youthful workforce.

Infrastructure Boom:

Infrastructure development in India will significantly boost economic growth by improving connectivity, reducing transportation costs, and enhancing the efficiency of supply chains. It will create jobs, stimulate industries like construction, manufacturing, and logistics, and attract more foreign investments. Better infrastructure will also improve access to healthcare, education, and markets, benefiting rural and urban populations alike. Additionally, it will support sustainable growth through energy-efficient solutions and smart cities, fostering long-term economic stability and quality of life improvements.

Robust Startup Ecosystem

India’s startup ecosystem is one of the fastest-growing in the world, ranking as the third-largest globally. As of 2024, India is home to over 95,000 startups, with more than 110 unicorns (startups valued at over $1 billion). The ecosystem has attracted significant foreign investment, with venture capital and private equity funding crossing $40 billion annually in recent years. Government initiatives like Startup India, tax incentives, and incubator support have spurred innovation across sectors, particularly in technology, fintech, healthcare, and e-commerce. Additionally, India’s young, tech-savvy population and a rising middle class are driving the adoption of new services, creating a vibrant environment for startups to thrive.

Economic reforms:

Over the past 10 years, the BJP government has introduced several policies aimed at boosting economic growth, enhancing infrastructure, fostering entrepreneurship, and improving ease of doing business. Here’s an overview of key initiatives:

  1. Make in India (2014)

  2. GST (2017)

  3. Digital India (2015)

  4. Insolvency and Bankruptcy Code (2016)

  5. Startup India (2016)

  6. Pradhan Mantri Jan Dhan Yojana (2014)

  7. Production Linked Incentive Scheme (2020)

  8. Tax reforms – faceless assessments, corporate rate tax cuts

  9. Renewable sector push

  10. Jan Dhan Yojana

Low Interest Rates and IPO Fundraising

India’s current low interest rate environment is fostering increased borrowing for businesses and consumers, driving investments and economic activity. Additionally, record-breaking IPO fundraising by Indian companies has injected substantial capital into the economy, enabling businesses to expand, innovate, and generate employment. These factors combined create a fertile ground for sustained economic growth, as companies leverage accessible funding to scale operations and meet rising demand.

Domestic Market and Export Boom

India’s large and growing domestic consumer market, driven by a young and upwardly mobile population, offers a robust foundation for long-term growth. Rising disposable incomes and a growing middle class continue to fuel demand for goods and services across sectors.

 

Simultaneously, India’s record-breaking exports in sectors like engineering goods, pharmaceuticals, and software services are strengthening its global economic footprint. The dual advantage of a vast internal market and increasing exports positions India as a resilient and versatile player in the global economy.

Geopolitical Advantage: As companies diversify supply chains away from China, India is emerging as a key alternative due to its skilled labor pool, stable government, and market size.

 

Rising Global Influence: India’s active participation in international forums (G20 presidency, BRICS, QUAD) enhances its stature, encouraging trade and foreign collaboration.

 

Financial Stability:

  1. Forex Reserves: India has robust foreign exchange reserves of over $600 billion, providing a cushion against external shocks.

  2. Debt Management: With controlled fiscal deficits and sustainable public debt levels, India has avoided major macroeconomic imbalances.

  3. GDP Growth: India remains one of the fastest-growing major economies, with a projected growth rate of 6-7% annually, outpacing most global peers.

Conclusion

 

India’s unique combination of demographic potential, financial stability, digital acceleration, economic reforms, and infrastructure investments positions it as a global growth engine. With proactive policymaking and increasing global alignment, India is poised for sustained, high-growth momentum in the coming decades.

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Monthly Market Outlook – NOVEMBER’24

Early Exits, Lost Billions

We all admire legends like Mark Zuckerberg, Warren Buffett, Steve Jobs, and Elon Musk for building billion-dollar empires. Yet, behind their success lies a lesser-known truth: they didn’t do it alone.

Each of them had co-founders or partners or investors who were part of the journey but exited the stage too soon, missing out on the chance to share in the incredible wealth that followed. These four instances offer valuable lessons about vision, timing, and staying the course.

Ronald Wayne (Apple)

Wayne co-founded Apple with Steve Jobs and Steve Wozniak but sold his 10% stake for $800 in 1976. Today, that stake would be worth over $200 billion (making him the fifth richest person)

Marc Randolph (Netflix)

Randolph left Netflix early, before it grew into the streaming giant it is today. While he benefited financially, a full stake in Netflix, now worth over $200 billion, would have translated into several billions more.

Rick Guerin (Berkshire )

In the 1973-74 downturn, Rick was levered with margin loans. And the stock market went down almost 70%. Rick got margin calls, and he sold his Berkshire stock to Warren Buffet at under $40 apiece (today $700,000). His Net worth would have been $4 Billion.

Andy Bechtolsheim (Google)

Bechtolsheim, an early investor in Google, provided the company with a $100,000 check before it was even incorporated. While he did profit handsomely when Google went public, had he retained his entire stake, it could have been worth over $10 billion, far exceeding his eventual earnings.

India in Focus: A Growth Story Unfolding

 

“India can become AI chip capital of the world”: SoftBank’s Masayoshi Son

 

“India ‘kind of laboratory to try things”: Bill Gates, Microsoft

 

“India is becoming ‘startup nation’ of the world” WEF President Borge Brende

 

“The world is bullish on India” IMF’s Krishnamurthy Subramanian

Economic Indicators Overview – October 2024

 

Manufacturing PMI: India’s Manufacturing Purchasing Managers’ Index (PMI) moderated to 56.5 in November 2024, compared to 57.5 in October. Despite the slowdown, the index remained firmly in the expansion zone (>50) for the 40th consecutive month. Growth was bolstered by accelerated exports and sales, although the rate of output expansion softened. Rising input costs posed challenges but were offset by resilient external demand.

 

Services PMI: The HSBC India Services PMI, compiled by S&P Global, held steady at 58.4 in November 2024, marginally down from 58.5 in October. Robust growth in the services sector continued, supported by strong demand and record hiring. Domestic and international orders contributed to sustained momentum. However, input cost inflation surged to a decade-high, leading companies to pass on price increases to clients, reflecting in higher output prices.

 

GST Collections: Gross GST collections stood at ₹1.82 trillion in November 2024, marking an 8.5% year-on-year growth. This sustained the streak of monthly collections exceeding ₹1.4 trillion for the 33rd consecutive month. The April 2024 record of ₹2.1 trillion remains unmatched but sets a high benchmark for fiscal performance.

 

Core Sector Production: The index of eight core industries grew by 3.1% year-on-year in October 2024, up from 2.4% in September. Seven out of eight constituent sectors recorded growth, with coal production leading at 7.8% year-on-year. The improvement was influenced by a favorable base effect and steady industrial demand.

 

Industrial Production: Factory output, as measured by the Index of Industrial Production (IIP), increased by 3.1% in September 2024, a rebound from a 0.1% contraction in August. Growth was observed across all three major sectors—manufacturing, mining, and electricity—highlighting a broad-based recovery.

 

Credit Growth: Scheduled Commercial Bank credit grew by 11.15% year-on-year as of November 15, 2024, compared to 20.64% in the corresponding period of the previous year. The decline reflects a high base effect following the merger of HDFC Ltd. and HDFC Bank. Despite this, credit growth remains healthy, supported by robust lending activity across sectors.

Equity Market Performance – November 2024

 

Market Indices

  • The BSE SENSEX rose by 0.5% in November 2024, outperforming the NSE NIFTY index.

  • Both the BSE Mid-Cap and BSE Small-Cap indices underperformed the SENSEX, gaining only 0.1% and 0.4%, respectively, during the month.

  • Top-performing sectors for November 2024 included:

    • Information Technology (IT): +5.8%.

    • Teck: +4.9%.

    • Consumer Durables: +3.0%.

       

Institutional Flows

  • Foreign Institutional Investors (FIIs): Net FII outflows from Indian equities stood at – $2.5 billion in November, following significant outflows of – $11.2 billion in October 2024.

  • Domestic Institutional Investors (DIIs): DIIs continued to be net buyers, with inflows of + $4.5 billion in November 2024, though lower than the + $12.8 billion recorded in October.

  • Year-to-Date (CY2024) Trends

    • Net FII Flows: Negative at – $2.0 billion.

    • Net DII Flows: Robust at + $58.2 billion, significantly outpacing FII activity in the Indian equity cash markets.

       

This divergence highlights the sustained strength of domestic inflows, even amid global market uncertainties and persistent foreign outflows.

 

Indian Fixed Income Market Outlook – December 2024

 

Monetary Policy

 

On December 6, 2024, the Reserve Bank of India (RBI):

  • Maintained the policy rate, aligning with market expectations.

  • Reduced the Cash Reserve Ratio (CRR) by 50 basis points to 4%.

     

These measures reflect a balancing act between inflation and growth. The recent inflation print exceeded 6%, breaching the RBI’s upper target range, and prompted the central bank to revise its Q3 FY25 inflation projection to 5.7%. Despite limited room for immediate rate cuts, weaker-than-expected Q2 GDP growth and downwardly revised GDP forecasts for H2 FY25 provide scope for easing. The RBI is anticipated to cut policy rates in February 2025, with inflation expected to moderate to ~4% by Q2 FY26.

 

Liquidity

  • Banking System Liquidity: Average system liquidity remained robust at ₹1.42 trillion in November 2024 (vs. ₹1.53 trillion in October).

     

  • Core Liquidity: Core liquidity (system liquidity + government balances) declined sharply to ~₹1.4 trillion by November 22, from ₹3.2 trillion at October-end and ₹4.3 trillion at September-end.

    • Key drivers included:

      • RBI forex interventions to address currency pressures.

      • Higher cash demand during the festive season.

 

Fixed Income Market

  • Yields in the fixed income market remained largely range-bound in November 2024.

  • The 10-year G-sec yield traded between 6.75% and 6.85%, influenced by:

    • A higher-than-expected monthly inflation print, which temporarily pushed yields upward.

    • Softer-than-expected GDP data, which moderated yields towards month-end.

 

Fiscal Policy

  • Gross tax receipts for April-October 2024 grew by ~11% year-on-year, supported by:

    • Buoyant direct tax collections.

    • Resilient indirect tax performance.

  • The record-high RBI dividend further boosted non-tax revenues, strengthening fiscal buffers.

Key Events to Watch in December 2024

 

1. U.S. Policy Developments: The potential for increased tariffs on foreign goods entering the U.S. remains a critical area of focus as the new administration shapes its trade policies. Such measures could significantly impact inflation, global trade dynamics, and price-sensitive industries and markets worldwide.

 

2. Federal Open Market Committee (FOMC) Meeting The FOMC is scheduled to meet on December 18, 2024, to deliberate on monetary policy. Following rate cuts in September and November 2024, the policy rate currently stands at 4.5%-4.75%. Markets have largely priced in a 25-basis-point rate cut, though key economic indicators like labor market performance and inflation could influence the final decision.

 

3. Additional Market Monitors

  • Festive Season Demand: Consumer spending trends during the festive season will provide insights into domestic economic resilience.

  • Oil Market Volatility: Fluctuations in crude oil prices may influence inflation and trade balances, impacting energy-intensive industries.

  • Central Government Capex: Updates on capital expenditure plans by the central government will shed light on infrastructure growth and economic recovery prospects.

  • GST Council Meeting: Key policy announcements from the Goods and Services Tax (GST) Council could affect taxation and compliance trends, particularly for businesses operating in India.

 

These developments will play a significant role in shaping market movements and economic sentiment through December 2024.

Looking Ahead – Market Outlook

 

November 2024 witnessed a series of significant global and domestic developments, resulting in heightened market volatility. Key factors to watch in the coming months include:

 

Global and Domestic Factors

  1. U.S. Policy Shifts: With new U.S. leadership set to assume office early next year, potential material policy changes, particularly in trade and fiscal strategy, warrant close monitoring.

  2. State Election Impact in India: On the domestic front, recent state election results could reinforce policy continuity, boosting investor confidence and market stability.

  3. Q2 FY25 GDP Performance: India’s GDP growth for Q2 FY25 moderated to a seven-quarter low of 5.4% year-on-year, impacted by:

    • Adverse weather conditions.

    • Sluggish urban consumption.

    • Reduced government spending.

       

      Looking ahead, these challenges are expected to ease, supported by higher government expenditure, festive season demand, and a robust Kharif and Rabi harvest.

       

Corporate Earnings Trends

  • Earnings Downgrade Stabilization: The worst of earnings downgrades appears to be behind us, with minimal further reductions anticipated in the second half of FY25.

  • Sectoral Highlights

    • Weak overall consumption is offset by a strong premiumization trend.

    • Global demand-driven sectors like Information Technology and metals exhibit resilience, with minimal risk of earnings downgrades.

Valuation Trends

  • Large Caps: Valuations have corrected closer to long-term averages.

  • Mid and Small Caps: Despite recent corrections, these segments trade at a premium, supported by robust domestic flows.

     

Market Strategy

  1. Navigating Volatility: Given the uncertain geopolitical landscape, currency market fluctuations, and relative Indian market valuations, heightened volatility is likely in the near term.

  2. Investment Approaches

    • Large-Cap Focus: Well-diversified strategies, such as Large Cap, Flexi Cap, and Multi Cap funds, offer compelling opportunities for medium-term investors.

    • Downside Protection: Asset allocation strategies, including Multi Asset Allocation and Dynamic Equity, provide better risk-adjusted returns.

    • Mid and Small Caps: Long-term investors with higher risk tolerance can consider staggered allocations to mid and small caps through systematic investment plans (SIPs).

       

By maintaining a balanced and diversified approach, investors can navigate the current environment while positioning for long-term growth.

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Digital landlords

In the modern digital economy, digital landlords have emerged as pivotal entities reshaping industries & consumer behaviors. These are platforms that own and manage digital ecosystems, acting as intermediaries between users and services while commanding significant influence over market dynamics. Unlike traditional landlords who own physical spaces, digital landlords provide the virtual infrastructure where transactions, interactions, and services occur.

 

Their power lies in their ability to aggregate demand and supply, leveraging network effects to create dependency among users and businesses. By monetizing access to their platforms through fees, advertisements, or data utilization, these companies have become indispensable players in sectors like e-commerce, food delivery, financial services, and entertainment. Giants like Amazon, Zomato, Netflix, and Visa exemplify this model, driving unprecedented convenience for users while amassing substantial wealth and control.

Visa - Moving money globally

Visa has solidified its position as a dominant digital land lord in the global payments ecosystem, transforming how transactions are conducted. Over the past few years, its revenue has witnessed consistent growth, driven by the surge in digital payments and the proliferation of e-commerce. Visa’s expansive network, spanning millions of merchants and consumers across the globe, has made it an indispensable part of everyday financial transactions.

 

By offering seamless, secure, and instant payment solutions, Visa has created a dependency among businesses and individuals, embedding itself into the fabric of modern commerce. Its success lies not just in its technology but also in fostering a habitual reliance, making it nearly impossible to imagine a world without its services. This section explores Visa’s meteoric revenue growth and its pervasive influence as a digital landlord in the financial landscape.

Visa’s revenue growth has been supported by:

 

·       A strong gross profit margin

·       Consistent dividend growth

·       A premium valuation

·       Growth in payments volume

·       Growth in cross-border volume

·       Growth in processed transactions

 

Despite facing stiff competition, Visa continues to reign supreme in the global payments arena. As of 2023, it holds roughly 48% of the credit card market share based on the number of cards in circulation, compared to MasterCard’s 36%.

Meta

Meta, the parent company of Facebook, Instagram, and WhatsApp, has established itself as a dominant digital landlord by creating an interconnected ecosystem of platforms that billions of people rely on daily. Over the past few years, Meta’s revenue has seen exponential growth, driven by its advertising-based business model and data-driven personalization strategies. By leveraging algorithms designed to maximize user engagement, Meta has cultivated an addictive cycle of content consumption, making its platforms integral to modern social interaction, business marketing, and entertainment. This report explore show Meta’s strategic dominance has fuel led its financial success while shaping user behaviour on a global scale.

Key Aspects of the Monopoly

  1. Massive User Base: Meta owns three of the most-used platforms globally, with billions of active users across Facebook, Instagram, and WhatsApp.

     

  2. Cross-Platform Integration: By integrating features like messaging and advertising across these platforms, Meta has created a tightly interconnected ecosystem, making it difficult for competitors to thrive.

     

  3. Advertising Dominance: Meta’s platforms collectively capture a significant share of global digital ad revenue, providing businesses unparalleled reach.

     

  4. Data Aggregation: Meta collects vast amounts of user data across its platforms, enabling it to refine algorithms and maintain an edge over competitors.

     

  5. Addictive Features: Algorithms and features designed to maximize engagement have led to widespread dependence on Meta’s platforms for socializing, entertainment, and business.

Zomato - Never have a bad meal

Zomato, one of India’s leading food delivery and restaurant discovery platforms, has evolved into a quintessential digital landlord, revolutionizing how people dine and order food. Over the past few years, Zomato has witnessed remarkable revenue growth, driven by its extensive restaurant partnerships, data-driven personalization, and are lent less focus on user convenience. By creating a seamless ecosystem of food delivery, dining reviews, and subscription services like Zomato Gold, the platform has cultivated an almost addictive reliance among users. This report examines Zomato’s ascent as a digital landlord, exploring the strategies behind its success and its impact on consumer habits.

The company’s growth was driven by its robust execution, which has outpaced Swiggy’s expansion despite both players witnessing significant growth in user base and restaurant partners. Zomato’s monthly transacting users (MTUs) reached 20 million, while Swiggy had 14 million MTUs.

CDSL

Central Depository Services Limited (CDSL) has emerged as a cornerstone of India’s financial ecosystem, functioning as a digital landlord for the securities market. By providing a secure and efficient platform for dematerializing and managing financial assets, CDSL has made itself indispensable to investors, brokers, and financial institutions. Over the past few years, its revenue has seen remarkable growth, fueled by a surge in retail participation in stock markets and increased digital adoption.

 

CDSL’s platform has created a dependency among users by streamlining processes such as account opening, transaction recording, and custodial services. Its ability to centralize and manage critical financial data has made it not just a facilitator but a gatekeeper of the digital financial landscape, underscoring its influence and in dispensability in the era of digital finance.

Revenue: CDSL’s revenue has grown from Rs 2,843 m in FY20 to Rs 9,073 m in FY24. Over the past 5 years, the revenue of CDSL has grown at a CAGR of 33.7%.

 

Net Profit: The net profit of CDSL stood at Rs 4,196 m in FY24, compared to Rs 2,013 min FY21.

 

Over the past 5 years, CDSL net profit has grown at a CAGR of 40.8%.

Revenue Streams of CDSL

  1. The annual issuer charges: Every company (listed issuer of securities) pays annual charges to the depository as per SEBI’s guidelines, this is one of the major sources of recurring income for CDSL. In FY 2024, the collected annual issuer charges were Rs. 25,379 lakhs.

     

  2. Transaction charges: The next source of revenue is transaction charges and it is also the most significant source. Transaction charges are a fixed amount that the DP has to pay to the depository – CDSL for making any transactions (done by the investors/ traders). The transaction charges are paid by the trader/ investors and DP collects the same and deposits the amount with the depository. In FY2024, the transaction charges collected by CDSL were Rs. 22,158 lakhs.

     

  3. Online data charges: Then CDSL charges for online data as well. The primary charge collected under this segment is for KYC creation which is a one-time fee and then there are other charges for fetching data as well. In the FY2024, CDSL made Rs. 15,945 lakhs from online data charges.

     

  4. IPO and corporate actions charges: CDSL made around Rs. 9,256 lakhs from IPO and corporate actions charges in FY 2024.These are the charges paid by the issuer companies for facilitating IPO and other corporate actions by crediting the securities in the investors’ Demat account.

     

  5. Other segments: While the above-mentioned four categories make up the most of the revenue, there are a few other charges such as e-voting charges, ECAS charges, document storage charges, and others that add up to the revenue stream.

Netflix - See what’s next

Netflix has transformed the entertainment landscape, evolving from a DVD rental service to a global leader in streaming. Over the past few years, its revenue has surged, driven by its subscription-based model, international expansion, and investment in original content. With an algorithm that tailors recommendations and a vast library of binge-worthy shows and movies, Netflix has created a dependency among viewers, making it a quintessential example of a digital landlord. This section explore show Netflix has leveraged its platform to dominate the industry and reshape consumer behavior.

Revenue Streams of Netflix: Netflix’s revenue comes from several sources, including:

  1. Subscriptions: The majority of Netflix’s revenue comes from subscription fees, with about 90% of its revenue coming from subscriptions and partnerships in 2022. Netflix offers three subscription plans: basic, standard, and premium.

     

  2. Advertising: Netflix’s ad-supported tier is a new revenue source, and it accounts for half of new memberships in available markets. Netflix attracts advertisers through programmatic market places like Google Display & Video 360 and The Trade Desk.

     

  3. Content licensing: Netflix can license out its original content to other services, which brings in revenue. Some of Netflix’s original content, like Stranger Things and The Crown, have become globally popular.

     

  4. Partnerships: Netflix can form strategic partnerships to expand its reach.

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Tatas are blessed by God

The Tata Group, founded in 1868 by 29-year-old Jamsetji Nusserwanji Tata, began as a modest trading venture with an initial capital of just ₹21,000. Today, the conglomerate spans a vast array of industries, from salt to steel, with a market capitalization exceeding ₹33 lakh crore.

 

The late Rakesh Jhunjhunwala, one of India’s most respected investors, famously said, “The Tatas are blessed by God.”

 

Jhunjhunwala, who made a significant portion of his fortune through his investment in Titan (bought 6 crore shares of the company at just ₹3 in 2001 and held onto them for more than two decades). This investment delivered an extraordinary 83,250% return.

 

Investing in Tata Group entities, especially during times of turbulence, presents a compelling case. Let’s deep dive (not a recommendation to invest):

Tata Motors:

What went wrong?

 

-> Jaguar Range Rover sales dropped massively

-> The ambitious low-cost Nano car failed to capture the market

-> COVID-19 Impact

-> Demonetization & GST Fallout

-> Shrinking Domestic Market Share

 

Stock declined 89% from Rs. 600 to Rs. 63

Action taken

 

-> Tata turnaround plan

-> New models introduced and focus on hatchbacks, SUVs & EV

 

Revenue touched all time high of Rs. 4.4 lac crore in FY 2024 – growing by 25% CAGR in last 2 years

 

Stock appreciated from Rs. 63 to Rs. 1150

Titan:

What went wrong?

 

-> Lockout in Hosur factory

-> Low net profit margin

-> Low return on capital employed

 

Titan share was available around Rs. 3 in 2003

Action taken

 

-> Leveraged ‘Tata’ brand

-> Aggressive marketing of Tanishq, Skinn and Titan (watches)

Revenue touched all time high of Rs. Rs. 50,000 crore in FY 2024

Stock appreciated to Rs. 3,800 in 2024

Voltas:

What went wrong?

 

-> Intense competition from foreign brands

-> No advance technology

-> No customer loyalty

 

Stock price fell from Rs. 12 to Rs. 2.8 in 2001

Action taken

 

-> Invested 1% of revenue in training

-> Foreign collaborations

-> New product introductions

 

Revenue touched all time high of Rs. Rs. 12,000 crore in FY 2024

 

Stock touched all time high of Rs. 1946 in 2024

Trent:

What went wrong?

 

-> Intense competition from Pantaloon (2005-2006)

-> Low footfall

-> No Brand loyalty

 

The stock was available around Rs. 40 in 2008

 

Action taken

 

-> Launch of fast fashion brand Zudio

-> Restructuring of Westside

-> Close of loss making stores

 

Revenue touched all time high of Rs. Rs. 12,000 crore in FY 2024

 

Stock appreciated to Rs. 7,500 in 2024

Tata Elxsi:

What went wrong?

 

-> No growth in business

-> Recession in Japan (auto sector)

-> Wrong investments in movie VFX

 

The stock fell to Rs. 20 post doc com crises (2001)

 

 

Action taken

 

-> Focus on technology & AI

-> Focus on operating cash flows, EPS, and dividend

 

Revenue touched all time high of Rs. Rs. 3,500 crore in FY 2024

 

Stock appreciated crossed Rs. 9,000 in 2022

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India in the Era of Trump 2.0: What to Expect

With Donald Trump set to return to the presidency, there is considerable uncertainty surrounding his policies, especially as foreign investors are withdrawing capital from global markets at record levels. According to Nomura, Japan’s leading investment bank, emerging markets are likely to be affected—primarily China—but India stands to benefit the most from this shift.

 

Moody’s ratings suggest that New Delhi could gain significantly as global power dynamics shift under Trump 2.0. The US accounts for about 18% of India’s merchandise exports, with key exports including electronics, pearls and precious stones, pharmaceuticals, nuclear reactors, petroleum products, and to a lesser extent, iron and steel, autos, and textiles. In addition, India is one of the world’s leading exporters of services, particularly IT and professional services (including global capability centers involved in outsourcing value-added services). The US remains a key customer for these sectors.

 

Trump’s Top Priorities: Reducing US Debt, Boosting Domestic Manufacturing, and Tackling Illegal Immigration

 

So, how exactly will Trump’s second term impact India? Let’s break it down.

1. Geopolitical Stability with Reduced Tensions in Ukraine

  • Trump is likely to reduce US funding to Ukraine and prioritize domestic issues. This could lead to a reduction in global geopolitical tensions, creating a more stable international environment. A reduction in military spending and focus on domestic policies may be more favorable for India, especially in terms of global stability and security, allowing India to focus more on economic growth and regional security issues.

     

2. Higher Tariffs on China Could Benefit India

  • Trump has hinted at imposing significant tariffs (60%) on Chinese imports, which would help reduce US debt and incentivize local manufacturing. As a result, businesses looking to avoid high tariffs on Chinese goods could shift their supply chains to India, giving a boost to Indian exports. India could become a key beneficiary of this trade reorientation, particularly in sectors such as electronics, textiles, and automotive components.

     

3. US Inflation Could Lead to a Stronger Dollar

  • With higher tariffs and a push for increased domestic manufacturing in the US, inflation in the US is likely to rise. This, in turn, could push the US dollar to strengthen. While a strong dollar may lead to capital outflows from emerging markets, including India, it could also attract more foreign direct investment (FDI) into India as companies seek alternative, cost-effective manufacturing hubs outside of China.

     

4. Fossil Fuel Focus May Impact India’s Renewable Exports

  • Trump’s push for more fossil fuel exploration in the US could hurt Indian firms exporting renewable energy equipment like solar panels and wind turbines. With a less favorable regulatory environment for renewable energy in the US, Indian companies in this sector may face reduced demand. However, India’s broader energy transition strategy, focused on solar and wind, could still find opportunities in other global markets.

     

5. US Crypto Policies Could Offer New Opportunities for Indian Tech

  • Trump’s pro-crypto stance may create new opportunities for blockchain and decentralized finance technologies. India, which has been cautious about cryptocurrency regulation, could find itself at a crossroads: either embrace crypto innovation or continue to regulate it. Indian tech firms with blockchain capabilities might benefit from the global rise in crypto adoption, though India’s stance will be key in determining how much of this growth they can capture.

     

6. Stronger US Border Policies and Immigration Crackdown

  • Trump’s likely focus on curbing illegal immigration in the US could affect Indian IT professionals and students, especially those on H1-B visas. Although this might lead to a reduction in the influx of Indian talent to the US, it could simultaneously open up opportunities for Indian firms to offer outsourced services and tech talent solutions to the US market, as American companies look to diversify their workforce sourcing.

     

7. Tariff Concessions for Tesla Could Stimulate India’s EV Industry

  • Trump’s close relationship with Elon Musk could lead to favorable tariff concessions for Tesla’s electric vehicle (EV) project in India. If India opens up its market to Tesla and provides incentives for manufacturing EVs locally, this could accelerate India’s transition to cleaner transportation and make India an EV hub for both domestic consumption and exports.

     

8. Muted Comments on India-Canada Issues Could Strengthen US-India Ties

  • Trump’s likely more muted approach to the Indo-Canadian tensions (e.g., the Pannun-Nijjar issue) could reduce friction in India-Canada relations, ensuring that these issues don’t become a major stumbling block in broader India-US ties. This could create a more stable diplomatic and trade relationship between India and the US, fostering stronger bilateral cooperation.

     

9. Supply Chain Relocation Could Accelerate India’s Rise as a Manufacturing Hub

  • As companies around the world look to de-risk their supply chains and move out of China, India is well-positioned to benefit from this trend. Trump’s “America First” policies, combined with a push for supply chain diversification, could lead to an accelerated relocation of global manufacturing to India. India’s large consumer market, competitive labor costs, and improving infrastructure make it an attractive alternative to China for multinational companies.

     

10. Greater Economic Collaboration in Technology and Services

  • India’s export of IT services, particularly business process outsourcing (BPO), software development, and consulting services, is a critical pillar of the US-India trade relationship. Trump’s “America First” rhetoric may push for more collaborative ventures between US and Indian firms, especially in tech, where India already holds a significant competitive advantage. However, trade policies that favor US manufacturing over outsourcing could lead to adjustments in the way Indian companies operate with their American counterparts, but long-term, India’s digital prowess may continue to drive growth in the services sector.

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Monthly Market Outlook – OCTOBER’24

The Most Successful deals of all time

Facebook bought Instagram

In 2012, Facebook bought Instagram for $1 billion, which added $153 billion to its market value.

 

In 2023, out of Meta’s total revenue of $134.9 billion, Instagram’s contribution was $39 billion at approx. 29%

EBay bought Paypal

In 2002, eBay bought PayPal for $1.5billion

 

Thirteen years later, in 2015, eBay spun off PayPal as an independent public company, realizing $47.1 billion in value – 31 times what it initially paid.

Facebook bought Instagram

In 2006, Google bought Youtube for $1.65 billion.

 

In 2023, Youtube’s advertising revenue accounted for approx. 10.25% of Google’s total revenue. That year, the video platform’s annual ad revenues amounted to $31.5 billion

Google bought Android

In 2005, Google bought Android for around $50 million. Android helped Google compete with Apple and Microsoft by giving it a mobile OS.

 

Today, Android powers about 69.7% of all smartphones, making Google a global tech leader

India in Focus: A Growth Story Unfolding

 

“India deserves to be in list of global superpowers”: Russia’s Putin

 

“Every product category is on a growth path” Henrique Braun, EVP & President of International Development at The Coca-Cola Company

 

“Bharat is unstoppable” PM Modi on Make-in-India anniversary

Economic Indicators Overview – October 2024

 

Manufacturing PMI: India’s Manufacturing Purchasing Managers’ Index (PMI) increased to 57.4 in October 2024 from 56.5 in September, marking the 39th consecutive month of expansion (above 50). Growth was driven by accelerated exports and sales, despite rising input costs.

Services PMI: The Services PMI also showed strength, rising to 58.5 in October from 57.7 in September 2024, indicating continued robust activity in the service sector.

GST Collections: October 2024 registered the second-highest GST collections at INR 1.87 trillion, a 9% year-on-year increase. This marked the 32nd straight month of collections above INR 1.4 trillion, bolstered by stronger compliance, higher output prices, festive demand, and increased transaction volumes both domestically and through imports.

Core Sector Production: The index of eight core sector industries saw a modest 2% year-on-year growth in September 2024, down from 9.5% growth in September 2023, impacted by an unfavorable base effect. Growth was led by five out of the eight core sectors, with refinery production rising by 5.8% year-on-year.

Industrial Production: The Index of Industrial Production (IIP) reflected a 4.2% month-on-month decrease in June 2024, following a 5.9% year-on-year growth in May. This slowdown came as the Mining, Manufacturing, and Electricity sectors showed stable, albeit moderate, year-on-year growth.

Credit Growth: As of October 18, 2024, scheduled commercial bank credit growth stood at 11.52% year-on-year, down from 19.98% in October 2023 due to a high base effect post the merger of Housing Development Finance Corporation (HDFC) and HDFC Bank. For the first time in several quarters, bank deposit growth surpassed credit growth as the loan-to-deposit ratio normalized.

These metrics collectively highlight a resilient economic environment despite base effects and input cost pressures, underscoring sustained expansion across manufacturing and services with strong tax collection performance.

 

Equity Market Overview

 

The BSE SENSEX declined by 5.8% in October 2024, mirroring the performance of the NSE NIFTY index.

 

Mid and Small-Cap Performance: The BSE Mid-cap index underperformed the SENSEX with a 6.9% drop, while the BSE Small-Cap index outperformed, falling only 3.8% over the month.

 

Sector Highlights: Healthcare, Information Technology (IT), and Teck sectors led performance, with declines of 0.7%, 2.3%, and 4.6%, respectively. All 13 of BSE’s major sectoral indices ended October 2024 in the red.

 

Foreign and Domestic Institutional Flows: Foreign Institutional Investor (FII) flows into equities were negative in October 2024, amounting to an outflow of $11.2 billion, following an inflow of $6.9 billion in September.

 

Domestic Institutional Investors (DIIs) continued as net buyers, with a strong inflow of $12.76 billion in October, up from $3.8 billion in September.

 

For the calendar year 2024 (CY2024), net FII flows into equities totaled $0.6 billion, while net DII investments in the cash markets reached $53.6 billion, significantly surpassing FII activity.

 

Indian Fixed Income Market Outlook

 

Monetary Policy: In October 2024, the RBI held the policy rate steady at 6.50% and shifted its stance to “Neutral” from the prior “Focus on withdrawal of accommodation,” signaling flexibility for future rate adjustments. Key factors influencing this shift include improved clarity on inflation, expectations for food inflation to ease by Q4 due to favorable food production forecasts, and a stable growth outlook. With inflation and growth risks balanced, the RBI Governor emphasized that future actions will align with evolving economic conditions and the macro outlook.

 

Liquidity: Banking system liquidity saw an uptick in October, averaging Rs. 1.53 trillion, supported by government spending. Overall liquidity (system liquidity plus government balances) moderated slightly to an average of Rs. 4.1 trillion by the end of October (compared to Rs. 4.3 trillion in September and Rs. 4.1 trillion in August).

 

Currency Performance: The rupee depreciated slightly in October 2024, averaging 84.03 against the dollar, after remaining relatively stable at 83.81 in September (compared to 83.90 in August and 83.59 in July).

 

Fixed Income Market: Fixed income yields eased and were range-bound in the first half of the month, influenced by the RBI’s neutral stance, before edging higher in the latter half amid rising global uncertainties (geopolitical tensions and U.S. election developments). The 10-year G-sec yield fluctuated between 6.72% and 6.85% during the month, closing slightly higher at 6.81% (compared to 6.75% in September), reflecting global cues.

Key Events to Watch in November 2024:

  • Oil Prices: Volatility in oil prices remains a major focal point for both global and Indian markets. Contributing factors include ongoing geopolitical tensions, China’s recovery following recent fiscal stimulus, and production cut reversals by OPEC+ members that began in December 2023.

  • US Election Developments: Updates surrounding the United States elections are anticipated to influence market sentiment.

  • Festive Season Demand: The strength of demand during the festive season will be a key indicator for retail and consumer sectors.

  • Reserve Bank of India (RBI) Policy Stance: The RBI’s upcoming policy announcements are expected to shape market outlooks, particularly in light of inflation and growth concerns.

  • Indian and Global Earnings Seasons: Earnings reports from both Indian and global companies will provide insight into corporate health and market direction

 
Looking Ahead
 

  • October Performance: October 2024 was a challenging month for the Indian stock market, impacted by reduced foreign institutional investor (FII) inflows following China’s stimulus, global geopolitical uncertainties, and softer earnings in the initial Q2 results, which largely missed market expectations.

  • Sectoral Impact: All sector indices closed October in the red, with sectors reporting weaker results seeing substantial sell-offs by Foreign Portfolio Investors (FPIs).

  • Economic Indicators: Key indicators show signs of a slowdown, including discretionary spending and vehicle sales, while core inflation has risen, signaling potential economic constraints.

  • Valuations: Equity valuations remain elevated relative to historical norms, with mid-caps trading at significant premiums, followed by small and large caps. Current valuations anticipate growth to sustain, but they offer limited cushion for earnings disappointments across much of the market.

  • Growth Prospects: Upside potential may come from a recovery in international demand and rural resilience. However, market performance going forward is expected to rely heavily on earnings growth.

  • Investment Strategy: Given recent geopolitical events and current market valuations, heightened volatility is anticipated. Investors may benefit from focusing on large-cap-oriented strategies, such as Large Cap, Flexi Cap, or Multi Cap funds, over the medium term.

  • Downside Protection: Investors seeking to mitigate downside risk might consider diversified strategies like Multi Asset Allocation or Dynamic Equity funds.

  • Mid and Small-Cap Exposure: Long-term investors with sufficient risk tolerance can approach mid and small-cap allocations incrementally, utilizing systematic investment routes to manage exposure.

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Seizing opportunities amid market corrections

In light of recent market corrections, we want to provide insights into the factors at play, why volatility is a natural aspect of equity markets, and strategies to navigate the current environment while remaining focused on India’s strong growth potential.

Factors Behind Recent Corrections

 

Local Influences

  • Weak Q2 Earnings Across Key Sectors: The second quarter of FY2025 saw weaker performance in sectors like FMCG and automotive, impacting market sentiment. The banking sector is experiencing normalization of non-performing assets, leading to higher provisions, slower deposit growth, and increased costs—factors contributing to slower profit growth. Additionally, prolonged monsoon and lower government spending in the industrial and utilities sectors have affected earnings. However, we expect these to be temporary dips, with a recovery anticipated in the coming months.

     

  • High Valuations in Mid and Small-Cap Segments: Elevated valuations, particularly in mid and small-cap companies, suggest that a focus on large-cap allocations and diversified investments across asset classes may be more beneficial in the current landscape.

     

External Supply Factors

  • Foreign Institutional Outflows Due to Attractive Valuations in Other Markets: China’s recent economic stimulus, alongside Japan and other emerging markets’ appeal, has drawn foreign institutional investors (FIIs) away from India. FII holdings are now near historical lows, after offloading nearly Rs. 1,00,000 crores in October and Rs. 2,27,000 crores this year. We view this as a short-term trend, with India’s growth narrative remaining compelling in the long term.

     

Global Factors

  • US Election-Driven Global Volatility: While upcoming US elections may heighten global volatility, we expect minimal long-term impact on Indian markets.

  • Geopolitical Tensions in the Middle East: Recent instability in the Middle East may cause short-term fluctuations in oil prices, with limited and temporary effects on the Indian economy.

     

Technical Factors

  • Market Indicators Suggesting Correction: The Nifty 50 index’s Relative Strength Index (RSI) recently reached high levels, paired with technical patterns that suggest a correction.

Corrections and volatility are an integral part of equity markets:

Only 4 out of the last 44 CY, had intra-year declines less than 10%

Despite the markets having intra-year declines every year, 35 out of 44 years ended with positive return.

The two graphs highlight that markets typically undergo 10–15% corrections annually, yet often closing the year with positive returns. This highlights the value of staying invested despite short-term fluctuations, as markets tend to recover and reward patience over time.

Path Forward: India’s Resilient Growth Story

Though markets are currently volatile, India’s long-term growth trajectory remains strong:

  • Economic Resilience: India’s GDP growth continues to surpass historical averages, with recent inflation control measures positioning the economy for sustained expansion.

  • Robust Liquidity: With mutual fund inflows reaching historic highs of Rs. 25,000 crores per month, liquidity remains strong, underscoring investors’ faith in India’s growth story.

  • Positive Outlook from Global Institutions: The IMF projects a 7% growth rate for India, signaling that the country’s long-term growth story remains robust.

Strategies for Navigating Market Volatility

 

  • Large-Cap and Diversified Allocations: With mid- and small-cap segments appearing overvalued, focusing on large-cap stocks, including flexicaps with a large-cap tilt and multi-asset mutual funds, may offer more stability and resilience.

  • Systematic Investment Options: Consider using Systematic Investment Plans (SIPs) and Systematic Transfer Plans (STPs) to manage volatility effectively, allowing for cost averaging over time.

  • Staying Invested for Long-Term Gains: By remaining invested, you position yourself to benefit from India’s promising growth trajectory, as markets tend to reward patience over the long term.

     

We appreciate the trust you place in us to help guide your investments, and we’re here to answer any questions or discuss tailored strategies that best fit your goals.

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Your next crore

For many middle-class investors, a portfolio worth a crore still feels like a distant dream. Many of our investors have touched this milestone recently. As India’s equity culture continues to grow and the Sensex rises, more investors are eager to capitalize on this momentum.

However, we always remind our investors that reaching a crore is just one milestone on your financial journey, not the final destination. While it’s natural to feel excited, remember that the best is yet to come. In fact, each successive crore could take less time than you might imagine in your wealth creation journey.

The sooner you reach that first crore, the quicker you’ll move on to your second, third, and beyond. As illustrated in the chart above, if you invest Rs 50,000 per month at an annual return rate of 15%, it may take nine years to reach your first Rs 1 crore. But don’t be discouraged—if you continue investing, your second crore could come in just three years, and your third in only 2.5 years. This is the extraordinary power of compounding. By the 18th year, you could be adding nearly Rs 1 crore every year to your wealth.

 

And if you think that’s impressive, consider this: in your 28th year, an additional Rs 4 crore could be added from the ongoing Rs 50,000 monthly investment, while the 30th year could see Rs 5 crore added.

This isn’t just limited to SIPs. For example, it might take ten years for Rs 25 lakhs to grow into Rs 1 crore at a 15% return rate, but the next crore could come in just five years, and the one after that in three years only.

Compounding is like a snowball rolling downhill

 

It starts small, but as it gathers more snow, it grows larger with each turn. Similarly, reaching your first crore may feel like a long and challenging process because you’re starting with a smaller base. But once you hit that milestone, your portfolio’s growth accelerates, making it quicker to reach the additional crore. You’ll find that the time taken to achieve each additional crore becomes shorter and shorter.

 

Magic of compounding turns your money into a powerful wealth-generating tool. The key is to stay invested and allow your money to work harder for you as it grows.

 

Disclaimer: Equity returns are not a straight line, as depicted in the chart. They fluctuate over time, with ups and downs. The above examples are for illustrative and educational purposes only.

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Monthly Market Outlook – July’24

Who moved our markets?

It is an indisputable fact that stock prices are driven by liquidity in the short term and fundamentals in the long run.

 

India’s NSE 500 is one of the best-performing market in the world. We decoded who moved the markets over the last four years:

  1. COVID Strikes: February 2020 to March 2020

  • Foreign Institutional Investors (FIIs) sold ₹83,000 crore worth of Indian equities.

  • Domestic Institutional Investors (DIIs) invested ₹72,000 crore.

  • The market corrected by 35% because of sudden and aggressive selling.

  1. Post-COVID: April 2020 to April 2021

  • Seeing the cheap valuations of Indian equities and rate cuts across the globe, FIIs infused more than ₹2 lakh crore over the next 12 months.

  • DIIs were net sellers of ₹1.32 lakh crore.

  • This mismatch caused the indices to rise by 92% in a matter of 12 months.

 

  1. DII FOMO: April 2021 to October 2021

  • DIIs, fearing missing out, turned net buyers, infusing ₹51,000 crore in the next 6 months.

  • Along with DIIs, FIIs were net buyers as well, resulting in a 26% market rise over 6 months.

  1. Global rate hikes and Russia-Ukraine War:

  • FIIs withdrew a record ₹3.9 lakh crore from Indian equities.

  • Markets were resilient due to DII support, with DIIs infusing ₹3.09 lakh crore.

  • The market corrected by 20%.

  • Markets moved sideways from October 2021 to March 2023 (18 months).

  1. Rise of domestic investors: March 2023 to Date:

  • DIIs, sitting on record cash due to SIPs, NPS & EPF money, infused a record ₹3.58 lakh crore, while FIIs sold ₹84,000 crore.

  • The markets rose by 63%.

Position as of Now:

 

The markets have fully priced in the economic growth for the next few years. The valuations are not cheap. While a price correction (fall in prices) may not be significant because of liquidity, a time correction (sideways market) cannot be ruled out.

 

Domestic investors infused a record ₹34,697 cr., ₹40,608 cr. and ₹37,113 cr. in the last three months in equity mutual funds alone. FIIs want to invest in India but valuations are not attractive. Even if the market corrects, say by 10-15%, FIIs will invest heavily. Either way, it’s a win-win for patient Indian long term investor.

 

Existing investors can continue their investments. Fresh lumpsum should be deployed in funds with flexible approach – Multi Asset Funds and Flexicap Funds.

Quote of the month

There are two ways to increase your wealth:

  1. Increase your means or

  2. Decrease your wants

 

The best is to do both at the same time.

 

– Benjamin Franklin, Founding Father of the United States

“India best emerging market story; haven’t ever seen valuations and fundamentals so attractive”: Mihir Vora

 

“India can become world’s 2nd largest economy by 2031”: RBI deputy guv Michael Patra

India outpaces major economies in growth of intangible investments

 

Lamborghini bets big on India’s long-term potential

Economic Indicators Overview

 

Manufacturing PMI: India’s Manufacturing Purchasing Managers’ Index (PMI) for July 2024 dipped slightly to 58.1 from 58.3 in June 2024. Despite the decrease, the index has remained in expansion territory (>50) for the 36th consecutive month, driven by strong production volumes, new order intakes, and overall positive business sentiment.

 

Services PMI: The Services PMI, reported by HSBC, stood at 60.3 in July 2024. This marks nearly three years of consistent growth, with the index remaining above the critical 50-point threshold that separates expansion from contraction.

 

GST Collection: Gross GST collections reached INR 1.82 trillion in July 2024, reflecting a 10.3% year-on-year increase. This figure marks the third-highest collection on record and the 29th consecutive month of collections surpassing the INR 1.4 trillion mark. The increase is attributed to rising compliance, higher output prices, and increased tax revenues from imports and domestic transactions.

 

Core Sector Production: The index of eight core sector industries showed a year-on-year decline of 4% in June 2024, following a 6.3% growth in May 2024.

 

Industrial Production: Industrial output, as measured by the Index of Industrial Production (IIP), grew by 5.9% in May 2024, up from 5% year-on-year growth in April 2024. This acceleration is supported by stable growth across the mining, manufacturing, and electricity sectors.

 

Credit Growth: Credit growth for Scheduled Commercial Banks reached 14.01% year-on-year as of 12th July 2024, compared to 20.07% growth as of 14th July 2023. The apparent slowdown is largely due to the base effect following the merger of HDFC and HDFC Bank.

Equity Market Overview

 

The BSE SENSEX rose by 3.4% in July 2024, mirroring the performance of the NSE NIFTY index.

 

Mid-cap and Small-cap Indices: The BSE Mid-cap and Small-cap indices outperformed the BSE SENSEX, recording gains of 5.4% and 6.1% respectively.

 

Sector Performance: Among sectors, Infotech, Teck, and Oil & Gas were the top performers in July 2024, with gains of 12.9%, 11.2%, and 10.5% respectively. Out of BSE’s 13 sectoral indices, 10 ended the month in positive territory.

 

Net Foreign Institutional Investors (FIIs) flows into equities were positive in July 2024, with an inflow of $3.27 billion, recovering from an outflow of $3.11 billion in June 2024.

 

Domestic Institutional Investors (DIIs) remained net buyers of Indian equities, with net purchases of $2.80 billion in July 2024, slightly down from $3.43 billion in June 2024.

 

Fixed Income Overview

 

Global Trends: Many advanced economies, including the Bank of Canada and the European Central Bank, have started cutting interest rates. In July 2024, the Bank of England began its rate cut cycle, while the US Federal Reserve signaled a potential rate cut starting in September. Meanwhile, the Bank of Japan diverged by raising its policy rate and initiating a quantitative tightening program.

 

Indian Fixed Income Market – Future Outlook:

  • The commencement of rate cuts by major global economies and the anticipation of an early rate cut by the US are expected to exert downward pressure on global fixed income yields.

  • Indian bonds are likely to benefit from easing global yields, strong domestic macroeconomic fundamentals, lower core inflation, reduced bond supply, and improved demand, possibly due to bond inclusion.

  • Money markets are well-supported by ample system liquidity, driven by seasonality, lower T-bill supply, and Foreign Portfolio Investor (FPI) inflows.

  • While inflation is expected to ease in Q2 FY25, volatile food prices, robust domestic growth, and global geopolitical uncertainties are likely to keep the Reserve Bank of India (RBI) on hold during its August 2024 policy meeting.

  • The size and timing of the RBI’s rate cuts in the second half of FY25 (October-December) will likely be influenced by the evolving domestic inflation outlook and global policy actions.

     

Liquidity:

  • Banking system liquidity was positive in July 2024, improving to INR 1.1 trillion from a deficit of INR 50,000 crore in June 2024 and INR 1.4 billion in May 2024, supported by government spending and lower cash requirements.

  • Government balances remained strong, averaging INR 3 trillion in July 2024, compared to INR 4.2 trillion in June 2024 and INR 3.5 trillion in May 2024.

  • Core liquidity, which includes system liquidity and government balances, stood at approximately INR 4.25 trillion by the end of July 2024, up from INR 3.5 trillion at the end of June and INR 3.6 trillion at the end of May.

Events to Watch in August 2024:

 

Earnings Season: Indian companies are expected to continue reporting their Q1 FY25/Q2 CY24 earnings from early July 2024 through mid-August 2024. So far, earnings have been buoyant and largely in line with consensus expectations, reflecting the underlying strength of the economy.

 

Monsoon: As of August 2, 2024, cumulative rainfall was 4.4% above the long-term average (LTA), with weekly rainfall 18% above the LTA. Regionally, central and southern India experienced excess rainfall, northern India received normal rainfall, and east and northeast India saw a rainfall deficit. Out of the 36 sub-divisions, nine have reported deficient rainfall, 14 have seen normal rainfall, and 13 have received excess rainfall.

Looking Ahead:

 

India’s growth outlook remains positive, with most leading indicators showing strength. While the long-term domestic growth prospects are favorable, current equity valuations reflect much of this optimism, leaving limited room for disappointment.

 

Recent quarterly earnings were largely in line with expectations, but given the high valuations, any earnings misses could have a more pronounced impact.

  • Union Budget 2024: The budget remains focused on fiscal consolidation as outlined in the Interim Budget 2024, with emphasis on skill development, agriculture, MSMEs, climate change, and digital penetration.

  • Policy Continuity: The budget also reflects policy continuity with a sustained emphasis on capital expenditure (Capex) to create more employment opportunities and drive consumption.

  • Investment Cycle: The investment cycle is expected to continue with increased private sector participation, provided there are no major shifts in global dynamics or risk appetite.

  • Earnings Outlook: A mid-teen earnings improvement is likely on a broad scale. A recovery in international demand and a rebound in local rural markets could provide additional upside. Future market performance is expected to be closely tied to earnings growth.

  • Investment Strategies: Large-cap oriented strategies, such as Large/Flexi/Multi Cap funds, appear well-positioned. In the thematic space, the Banking & Financial Services sector looks attractive due to relatively favorable valuations.

  • Mid and Small Cap Allocations: For investors with a medium-term perspective, staggered allocations in Mid and Small Cap segments through a systematic investment route may be prudent.

Onesta Capital Ventures is a Multi Family Office based out of Gurugram (India). We aim to provide tailored independent wealth management and other family governance solutions to individuals and corporates.

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