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Category: Monthly market outlook

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Monthly Market Outlook – March’25

The Sleeping Town of Coca-Cola Millionaires

Dear Investor,

 

In the quiet town of Quincy, Florida, an extraordinary wealth story unfolded—one that remains a timeless example of the power of long-term investing.

 

During the Great Depression when Dow Jones corrected 89%, a local banker urged residents to invest in a company few could ignore: Coca-Cola. At the time, a single share traded for just $19. Many small-town families took his advice and simply held on.

 

Those who did, and reinvested their dividends, saw staggering results.

 

🔹 A single share of Coca-Cola in the 1930s would be worth over $19 million (Rs. 170 crore) today, purely through compounding and patience.

 

By the late 1940s, Quincy became the richest town per capita in the entire United States.

 

Quincy eventually came to be known as “The Town of Coca-Cola Millionaires”—not because its people traded often, but because they believed in quality, stayed the course, and let time do the work.

 

Even Warren Buffett recognized the value of Coca-Cola early on—he famously began his entrepreneurial journey by selling Coke bottles door-to-door as a child. So when the opportunity arose in the late 1980s, he invested $1.3 billion into the company through Berkshire Hathaway. That investment is now worth over $24 billion. But the most remarkable part? The annual dividend income from Coca-Cola shares alone is around $750 million—nearly 50% of his original investment—showcasing the power of long-term investing and compounding.

 

At Onesta, this philosophy lies at the heart of our investment approach. We focus on staying aligned with long-term goals—especially during short-term noise.

India in Focus: A Growth Story Unfolding


India outpaces global peers, only market to post gains since US tariff-induced lows

 

“There are more foreign capital focused on India today”: KKR’s co-CEO Joseph Bae

 

India is the only emerging market that people should own for long term: Mark Matthews

 


“Markets are fundamentally volatile. No way around it. Your problem is not in the math. There is no math to get you out of having to experience uncertainity.”



-Ed Seykota

Domestic Macroeconomic Snapshot

  1. India’s GDP grew 6.2% YoY in Q3FY25 (Oct–Dec), led by strong government and household spending.

  2. GST Collections hit ₹1.96 lakh crore in March, a 10% YoY rise, marking the 13th straight month above ₹1.7 lakh crore.

  3. CPI Inflation cooled to 3.61% in Feb (from 4.3% in Jan), the lowest in 7 months, driven by food prices.

  4. WPI Inflation rose marginally to 2.38%, indicating higher manufacturing costs.

  5. Core Sector Growth slowed to 2.9% YoY in Feb, a 5-month low due to weak crude and gas output. However, cement (+10.5%) and fertilisers (+10.2%) showed strong momentum.

  6. Industrial Output (IIP) rose 5% in Jan, led by manufacturing (+5.5%) and mining (+4.4%).

Equity Markets: Recovery Mode

  • After sharp corrections in February, March saw a rebound across segments:

    Sensex +5.11%, Nifty 50 +5.34%

    Midcap Index +5.62%, Smallcap Index +8.04%

  • Sector Leaders:

    Oil & Gas +11.3%, Metals +10.1%, Healthcare +8.4%

  • Worst Performers:

    Power (-4.3%), PSU (-4.1%), Capital Goods (-3.5%)

  • Valuations:

    Nifty 50 trades at 19.5x, below 5-year average of 24x—suggesting value in large caps.

    Small & midcaps still trade at premium, despite recent corrections (Smallcap -13.4%, Midcap -10.2% in Feb).

 

Fixed Income & Currency

  • RBI Repo Rate: Cut to 6.25%, balancing inflation & growth.

  • G-Sec Yields: Despite the cut, 10-yr yield rose to 6.55%, amid liquidity tightness and global cues.

  • INR/USD: Rupee remained volatile but supported by strong forex reserves of $640 bn.

 

Institutional Flows (March 2025)

  • FII Activity: Turned net buyers again post Feb correction.

  • DII Activity: Continued consistent inflows.

     

    Sentiment improved amid tax cuts, rate cut expectations, and domestic resilience.

 

Global Highlights

  • US Services PMI dropped to 49.7 – first contraction in 2 years.

  • US Inflation at 3% in Jan, up from 2.9% – “last mile” proving sticky.

  • US GDP slowed to 2.3% in Q4, down from 3.1% in Q3.

  • Unemployment at 4%, signaling softening labor market.

  • China cut interest rates, launched fiscal support in response to weak demand and trade tensions.

  • Brent Crude range-bound around $74.7/barrel – helping tame India’s inflation

The world is watching closely to see if the chaos can be calmed – or if this truly marks a turning point toward a more fractured global economy.

Key Trends for Q2 FY25 (April–June)

  • Rate Cuts: RBI may ease further by 25–50 bps in CY25, supporting credit and investment.

  • Consumption revival: Tax cuts and rural demand to boost discretionary and staples.

  • Capex-Led Growth: Public infra and private capex gaining pace.

  • Tariff Impact: Global trade frictions and retaliations remain key overhangs.

  • Valuations: Pockets of value in large caps and defensives; caution in small/midcaps.

 
 

Investment Strategy

What may work:

  • Large Cap, Flexi Cap, and Large & Midcap Funds: Attractively valued, offer scalability

  • Balanced Advantage, Multi Asset Funds: Hedge volatility with equity-debt allocation

  • Healthcare & Consumption Thematics: Offer resilience amid uncertain global cues

Approach:

  • Gradual Re-entry into mid/smallcaps via SIP/STP routes.

  • Systematic Allocation Reviews in light of personal goals, not just market movement.

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Monthly Market Outlook – May’25

End of an Era: Warren Buffett Announces Retirement

  1. Warren Buffett, the ‘Oracle of Omaha’, has officially announced his retirement, marking the close of one of the most remarkable careers in global financial history.

     

  2. Over six decades, Buffett transformed Berkshire Hathaway from a struggling textile firm into a $900 billion conglomerate, making it one of the most respected companies in the world.

     

  3. Under his leadership, Berkshire Hathaway stock rose from $11 in 1965 to over $800,000 per share in 2025, delivering a CAGR of over 19% for 60 years—unmatched in modern history.

     

  4. Buffett created more millionaires and billionaires than any investor alive, simply by sticking to timeless principles of value investing, patience, and discipline.

     

  5. He championed investing in businesses, not stocks, famously stating: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

     

  6. Among his biggest wins: Coca-Cola, American Express, Apple, Bank of America, and Geico—all held for decades and compounding value quietly.

     

  7. He was one of the first investors to understand the power of “float”—using insurance premiums to fund investments long before payouts.

     

  8. Buffett never split Berkshire stock or paid dividends, encouraging long-term ownership and investor loyalty—a rare feat in today’s fast-paced markets.

     

  9. Despite his success, he maintained a frugal lifestyle, living in the same Omaha home since 1958 and driving modest cars—reinforcing his authenticity.

     

  10. He is globally admired for his ethical standards, integrity, and humility in an industry often marked by short-termism and hype.

 

  1. His annual letters to shareholders became investment gospel, offering not just financial insight but timeless life and business lessons.

     

  2. Buffett was a teacher at heart—mentoring thousands of investors without charging a fee, and urging them to “stay in their circle of competence.”

     

  3. His closest business partner, Charlie Munger, who passed in 2023, was an inseparable intellectual force in shaping Buffett’s thinking.

     

  4. One of Buffett’s most lasting legacies is philanthropy: He has pledged to give away 99% of his $150 billion wealth, with billions already donated through the Gates Foundation.

     

  5. Buffett spearheaded the “Giving Pledge”, encouraging the world’s wealthiest to commit a majority of their fortune to society.

     

  6. He famously said, “I want to give my kids enough so they can do anything, but not so much that they can do nothing,” embodying his values-driven parenting.

     

  7. He built Berkshire to survive beyond him—his succession plan is already in place, with Greg Abel expected to lead a well-structured, decentralized empire.

     

  8. While he’s stepping back from active management, his principles—prudence, patience, and simplicity—will remain embedded in investment philosophy for generations to come.

     

  9. Buffett taught us that the most powerful force in investing isn’t prediction, but compounding—and the real edge is temperament, not IQ.

     

  10. As this era ends, investors are left not just with a remarkable track record—but with a blueprint for life: value people, value patience, and let compounding do the magic

India in Focus: A Growth Story Unfolding

India displaces Japan as most preferred market in Asia, shows BofA survey

India tops global PMI rankings among developed and emerging markets: JP Morgan

India Macroeconomic Snapshot – April 2025

1. GDP & Growth Drivers

  • India’s economy remains resilient. FY25 GDP is estimated at 6.2–6.5%, supported by robust government spending, manufacturing strength, and export performance.

  • Manufacturing PMI rose to 58.2 in April (10-month high), while services PMI stayed strong at 58.5, indicating continued economic momentum.

 

2. Inflation & Liquidity

  • CPI Inflation dropped to 3.16% in April, a near 6-year low, led by easing food prices—well below RBI’s 4% target.

  • WPI Inflation cooled further to 2.05%, aided by softening food and fuel prices despite higher manufacturing costs.

  • Liquidity improved sharply: April average system liquidity turned positive at ₹1.4 lakh crore, supported by government spending and RBI’s ₹1.25 lakh crore OMO operations

 

3. Monetary Policy

  • RBI cut the repo rate to 6.0% (25 bps reduction in April), shifting to an accommodative stance.

  • Governor’s commentary signals the next move could only be either a pause or further rate cuts.

 

4. Trade & Currency

  • Exports hit a record $825 bn in FY25, up 6% YoY, despite a wider trade deficit of $22 bn in March.

  • The INR appreciated to an average of ₹85.54/USD in April (vs ₹86.64 in March), aided by easing dollar strength and robust forex reserves (~$640 bn)

Equity Market Highlights – April 2025

1. Market Recovery

  • After Feb-March volatility, April saw broad-based gains:

    • Sensex: +3.65% | Nifty 50: +3.46%

    • Midcap Index: +3.26% | Smallcap Index: +1.63%

       

2. Sector Performance

  • Top Gainers:

    • Consumer Durables +5.65%

    • Oil & Gas +5.40%

    • FMCG +5.17%

  • Laggards:

    • Metals -5.76%

    • IT -2.97%

    • Power -4.3%

       

3. Valuation Insights

  • Nifty 50 P/E at ~19.5x, still below its long-term average (~24x), presenting attractive large-cap entry points.

  • Mid & small caps, despite correction, continue to trade at a premium, requiring selective exposure.

Fixed Income & Currency

1. Yields & Spreads

  • 10-yr G-sec yield eased to 6.36% in April (from 6.58% in March), driven by:

    • Cooling inflation

    • RBI’s accommodative stance

    • INR appreciation

       

2. SDL & Corporate Bond

  • SDL yields eased to 6.67% (vs 6.96% in March).

  • AAA PSU bond yields closed lower (6.96%–7.08% range).

Global Snapshot – April 2025

1. U.S.

  • GDP contracted -0.3% in Q1, primarily due to a sharp drop in net exports (tariff impact).

  • April CPI cooled to 2.3%, though 1-year inflation expectations rose to 6.2%—indicating “last-mile” inflation stickiness.

  • Fed kept rates unchanged, watching inflationary trends post-tariffs.

     

2. China

  • Cut rates and lowered reserve ratios, injecting $139 bn to offset export drag from U.S. tariffs.

  • Exports surged 8.1%, driven by Southeast Asian and European demand.

3. Global Markets

  • Risk assets rebounded with easing tariff concerns:

    • Japan +19%, Germany +18%, India +11% MoM

    • Trade tensions, regionalization, and inflation remain key risks globally

Key Trends to Watch – Q2FY25 (April–June)

  • Rate Cut Potential: Further 25–50 bps easing likely by RBI in CY25.

  • Consumption Uplift: Boost from tax cuts and rural demand revival.

  • Capex-Led Growth: Strong public infra push; private capex pickup expected.

  • Trade Frictions: Tariffs may dampen global trade.

  • Valuations: Opportunities in large caps and select defensives

Investment Strategy – May 2025

✅ What Looks Attractive

  • Large Cap, Flexi Cap, Large & Mid Cap Funds: Attractive valuations and scalability.

  • Balanced Advantage / Multi Asset Funds: Hedge volatility with dynamic equity-debt exposure.

  • Themes to Watch: Healthcare, Consumption, PSU Banks (tactically), Digital Infrastructure.

     

⚠️ Risk-Controlled Approach

  • Mid/Small Caps: Prefer SIP/STP routes for gradual re-entry.

  • Focus on Asset Rebalancing: Based on personal goals, not market noise

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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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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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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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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.

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Monthly Market Outlook – June’24

Welcome to the ‘Everything Rally’

Investors have been riding what can best be described as an “everything rally”. Not only have U.S. and Indian stocks soared to new highs, but other asset classes like Cryptocurrency and Gold have also climbed to fresh records.

A tally of investment gains in the past 12 months (1st July 2023 to 30th June 2024):

 

Cryptocurrency:

Bitcoin: 86%

Ethereum: 60%

Equities:

United States:

S&P 500: 26%

NASDAQ 100: 36%

India:

NSE 500: 38.7%

BSE Mid Smallcap 400 index: 60%

Japan’s Nikkei 225: 27%

Metals

Gold: 23%

Silver: 28%

What Caused the Everything Rally?

 

  • Diminishing Recession Fears

    • Initial concerns about a looming recession in 2023 gradually alleviated as economic indicators displayed resilience.

    • Strong performance in the tech sector and positive corporate earnings shifted market sentiment, dispelling recessionary apprehensions.

       

  • Approval of Bitcoin and Ethereum ETF by the SEC

    • Regulatory approval of major cryptocurrencies like Bitcoin and Ethereum provided a boost to the market and led to huge inflows into crypto ETFs

       

  • Expectation of Future Rate Cuts

    • Risky assets performed better with the expectation of future rate cuts by central banks.

       

  • Rise of AI

    • US tech companies experienced record earnings, leading to a rally in AI-related stocks.

       

  • Strong Domestic Growth in India

    • India’s strong domestic growth contributed to positive market sentiments in India (backed by record inflows into equities).

       

  • Quick Action by the FED

    • The Federal Reserve’s swift response to a series of bank failures in the US stabilized the market.

       

  • High Liquidity

    • A significant amount of money ($6.15 trillion) is invested in money markets, which is expected to eventually flow into risk assets.

       

  • Shift of Money from Emerging Markets

    • Capital moved from emerging markets to developed markets like the US, Germany, and Japan, boosting their markets.

       

  • Record Gold Buying by Chinese Central Banks

    • Chinese central banks’ record purchases of gold have influenced global market dynamics and added to the rally in the precious metal.

Quote of the month

It is not hard to make money in market. What is hard to avoid is the alluring temptation to throw your money away on short, get rich quick speculative binges. It is an obvious lesson, but one frequently ignored.

 

– Burton Malkiel

“India can be third pillar of growth with US, UK”: TCS CEO K Krithivasan

 

“India to remain fastest-growing among largest economies”: World Bank

 

“India To Become A Superpower By 2047”: Financial Times’ Top Commentator Martin Wolf

Economic Indicators Overview:

 

Manufacturing PMI: India’s Manufacturing Purchasing Managers’ Index (PMI) rose to a two-month high of 58.3 in June 2024, up from 57.5 in May 2024. This marks the 35th consecutive month in the expansion zone, driven by accelerated manufacturing employment and improved new order intakes.

 

Services PMI: The headline Purchasing Managers’ Index (PMI) for services, released by HSBC on Wednesday, increased to 60.5 in June from 60.2 in May. It has remained above the 50-mark, which separates growth from contraction, for nearly three years.

 

GST Collection: Gross GST collections reached INR 1.74 trillion in June 2024, a year-on-year increase of 7.7%. This marks the slowest growth in three years but represents the 28th consecutive month of collections exceeding INR 1.4 trillion.

 

Core Sector Production: The index of eight core sector industries decelerated year-on-year to 6.3% in May 2024, down from a 6.7% increase in April 2024.

 

Industrial Production: Factory output growth, measured by the Index of Industrial Production (IIP), moderated to 5% in April 2024, compared to a 5.4% year-on-year increase in March 2024. This was driven by positive but slowing growth in the mining, manufacturing, and electricity sectors.

 

Credit Growth: Scheduled Commercial Bank credit growth reached 19.16% year-on-year as of June 14, 2024, compared to 15.42% year-on-year growth observed on June 16, 2023.

Equity Market Overview:

 

The BSE SENSEX (+6.9%) rose in June 2024, in line with the NSE NIFTY index. The BSE Mid-cap and Small-cap indices outperformed the BSE SENSEX, with growths of +7.7% and +10.3% respectively.

 

Sector Performance: Sector-wise, Infotech, Teck, and Realty were the top three performers over the month of June 2024, clocking +11.3%, +9.5%, and +8.2% respectively.

 

Net Foreign Institutional Investors (FII) Flows: Net Foreign Institutional Investors (FII) flows into equities reversed to turn positive for June 2024 (+$2.91 Bn), following -$3.02 Bn in May 2024.

 

Domestic Institutional Investors (DIIs): Domestic Institutional Investors (DIIs) remained net buyers of Indian equities (+$3.42 Bn), down from +$6.68 Bn in the previous month.

 

In CY2024, Net Foreign Institutional Investors (FII) flows stood at +$0.14 Bn, while net Domestic Institutional Investors (DII) investments in the cash markets stood at +$28.48 Bn, outpacing Foreign Institutional Investors (FII) investments.

 

Fixed Income:

 

June 2024 saw a shift in the monetary policies of some advanced economy central banks. The European Central Bank (ECB) led the way by beginning a rate cut cycle, while the Bank of England (BoE) indicated that it might start in August. However, further moves from these central banks are likely to be data-dependent and smaller than initially expected. Despite recent downside data in the US, the Federal Reserve is waiting for more conclusive data before starting a rate cut cycle, opting to stay on hold during the June 2024 meeting.

 

Indian Fixed Income Market – Future Outlook:

  • The initiation of a rate cut cycle by some advanced economies, coupled with muted economic data from the US, may raise hopes of a global monetary policy shift in the coming quarters.

  • Key events to watch include:

    1. The upcoming budget, focusing on the path of fiscal consolidation and the quality of expenditure patterns.

    2. Foreign Portfolio Investor (FPI) flows following bond inclusion.

  • While inflation has been trending downwards in recent months and is expected to ease further in FY25, factors such as the evolving food trajectory driven by the monsoon, strong domestic growth, high oil prices, and global geopolitical uncertainty have led the RBI to hold its stance.

  • Going forward, the size and timing of the RBI’s rate cut cycle may be influenced by the evolving domestic inflation outlook and the actions of global policymakers. We anticipate the RBI to cut rates in the second half (October/December) of FY25.

 

Liquidity:

 

Banking system liquidity eased during the month, averaging -₹50 billion compared to May 2024’s average of -₹1.5 billion, due to government spending, lower T-bill issuances, and reduced cash requirements. Government balances remained robust, averaging around ₹4 trillion (up from ₹3.7 trillion in May 2024). Core liquidity (system liquidity + government balances) stood at approximately ₹3.5 trillion by the end of June, compared to ₹3.6 trillion by the end of May.

Events to Watch in July 2024:

  • Union Budget: The Union Budget will be presented in the latter half of July 2024. Earlier this year, the finance minister presented the interim budget in February 2024. The upcoming budget is expected to address some demand-side concerns to improve the overall household situation. The tone and allocation of the budget will be closely monitored by the markets.

     

  • Monsoon: As of June 28, 2024, cumulative rainfall was 14.5% below the long-term average (LPA), while weekly rainfall was 8.3% above the LPA. Cumulatively, rainfall was above normal in southern India but deficient in other parts of the country. Out of the 36 sub-divisions, four have received scanty rainfall, 14 have received deficient rainfall, 11 have received normal rainfall, and seven have received excess rainfall.

     

  • Earnings Season: Indian companies will report earnings for Q1FY25/Q2CY24 from the beginning of July 2024 until mid-August. The earnings outlook remains buoyant amidst stable economic growth and the anticipation of the upcoming Union Budget.

     

  • Oil Prices: Oil demand and rising tensions in the Middle East have kept crude prices elevated. The Organization of the Petroleum Exporting Countries (OPEC+) cuts have also contributed to this. Oil prices remain a key factor to watch for the markets.

Looking Ahead:

 

India appears well-positioned with several strong macroeconomic indicators, with real GDP growth surpassing expectations in FY24. The economy has shown remarkable resilience, including robust Gross Value Added (GVA) growth, manageable trade and fiscal deficits, inflation around 5% as of June 2024, strong corporate earnings, and a stable currency.

 

Gross Domestic Savings Rate: A positive development in India’s economic performance was the improvement in the gross domestic savings rate, which reached a nine-year high in FY24 as of May 2024. This increase was driven by higher household financial savings. If these savings are channeled into productive investments, they could support future economic growth.

 

Investment Cycle: The investment cycle is expected to continue with greater participation from the private sector, assuming no major shifts in global dynamics and risk appetite.

 

Corporate Profit to GDP Ratio: In 2024, the corporate profit to GDP ratio stood at approximately 5%, reaching a 15-year high as of March 2024.

 

Economic Outlook: The longer-term outlook for domestic growth remains positive but is well-reflected in near-term valuations.

 

Earnings Growth: We believe mid-teen earnings improvement is possible at a broad level. Recovery in international demand conditions and local rural recovery could provide additional upside. Moving forward, market performance may largely depend on earnings growth. Large Cap-oriented strategies such as Large, Flexi, and Multi Cap appear better positioned. In the thematic space, Banking & Financial Services look attractive due to relative valuations.

 

Mid and Small Cap Allocations: In line with the medium-term perspective, staggered allocations to Mid and Small Cap through a systematic route are advisable.

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MONTHLY MARKET UPDATE & OUTLOOK – MAY’24

NVIDIA's Meteoric Rise

NVIDIA, a leading name in the tech industry, has recently achieved a significant milestone by surpassing Apple to become the world’s second-largest company by market capitalization (for a brief period). This remarkable achievement reflects not only the company’s impressive stock performance but also its strategic positioning and innovative prowess in key technology sectors.

The stock is up 32 times in the last 5 years

The revenue & profits are up 5 and 10 times respectively in the last 4 years and are expected to increase by another 3X in next 3 years

Factors Behind NVIDIA’s Meteoric Rise

  1. Dominance in AI and Data Centers: NVIDIA has established itself as a powerhouse in artificial intelligence (AI) and data center markets. Its Graphics Processing Units (GPUs) are critical for AI computations, machine learning, and high-performance computing, making them indispensable for tech giants and researchers.

  2. Gaming Sector Leadership: The company’s roots in gaming remain strong, with its GPUs being the gold standard for gaming enthusiasts. The continued demand for high-performance gaming hardware has been a steady revenue stream.

  3. Strategic Acquisitions and Partnerships: NVIDIA’s strategic acquisitions, like Mellanox Technologies and Arm Holdings, have bolstered its technological capabilities and market reach. These moves have diversified its product portfolio and opened new revenue streams.

  4. Growth in Automotive Technology: NVIDIA is making significant strides in the autonomous vehicle market. Its DRIVE platform is a comprehensive solution for self-driving technology, attracting partnerships with major automotive manufacturers.

  5. Expansion into Metaverse and Omniverse: The company is also venturing into the burgeoning fields of the Metaverse and Omniverse. These platforms are designed for creating virtual worlds and simulations, positioning NVIDIA at the forefront of next-generation digital experiences.

     

    How Nvidia Makes Money

Picture of the month

Quote of the month

Winning at money is 80 percent behavior and 20 percent head knowledge. What to do isn’t the problem; doing it is. Most of us know what to do, but we just don’t do it. If I can control the guy in the mirror, I can be skinny and rich.

 

– Dave Ramsey

“India is a wow country” American investor, Jim Rogers

 

India to become second-largest contributor to global growth, says BofA Securities

 

Wall Street Lands on India, Looking for Profits It Can’t Find in China

Economic Indicators Overview:

 

GDP: The Indian economy grew at a robust 8.2% year-on-year (y/y) in FY24, surpassing the advance estimates of 7.6% y/y.

 

Manufacturing PMI: India’s Manufacturing Purchasing Managers’ Index (PMI) in May 2024 remained strong at 57.5 (compared to 58.8 in April 2024), marking the 34th consecutive month in the expansion zone, driven by accelerating new export orders and job growth.

 

Services PMI: India’s services sector displayed strong growth in May 2024, registering a PMI reading of 60.2.

 

GST Collection: Gross GST collections stood at INR 1.73 trillion (+10% y/y) in May 2024, marking the 27th consecutive month of collections exceeding the INR 1.4 trillion mark.

 

Core Sector Production: The index of eight core sector industries accelerated year-on-year to +6.2% in April 2024, compared to a +6% increase in March 2024.

 

Industrial Production: Factory output growth, as measured by the Index of Industrial Production (IIP), decelerated to -4.9% in March 2024, compared to a growth of +5.7% y/y in February 2024, driven by positive y/y growth in three major sectors: Mining, Manufacturing, and Electricity.

 

Credit Growth: Scheduled Commercial Bank credit growth reached 19.54% y/y as of May 17, 2024, compared to a y/y growth of 15.42% observed on May 19, 2023.

Equity Market Overview:

 

BSE SENSEX: The BSE SENSEX remained flat in May 2024, registering a slight decline of -0.7%, in line with the NSE NIFTY index.

 

BSE Mid-cap and Small-cap Indices: The BSE Mid-cap and Small-cap indices outperformed the BSE Sensex, with performances of +2.3% and -0.1% respectively.

 

Sector Performance: Capital Goods, Power, and Metals were the top-performing sectors in May 2024, with gains of +11.2%, +6.6%, and +4.7% respectively. Six of BSE’s 13 sectoral indices ended the month of May 2024 in the green.

 

Net Foreign Institutional Investors (FII) Flows: Net FII flows into equities were negative for May 2024, amounting to -$3.15 billion.

 

Domestic Institutional Investors (DIIs): On the other hand, DIIs were net buyers of Indian equities, with net inflows of +$6.43 billion.

 

Fixed Income:

 

After a sharp rise in April 2024 due to global financial market repricing, Indian fixed income market yields eased by almost 15-20 basis points during May 2024. This easing was attributed to easing global yields, muted inflation, a record RBI dividend raising hopes of faster fiscal consolidation, and rising expectations of lower gross issuances.

 

Liquidity:

Banking system liquidity was tight during May 2024, averaging a negative Rs 1.5 trillion, compared to flattish liquidity in April 2024, which is typically a seasonally easy month.

Looking Ahead:

  • The outcome of the general election suggests a likely continuation of key policies related to development and reforms. Coupled with India’s strong fundamentals, resilient domestic demand, and supportive policies, this continuity may provide buffers against external shocks.

     

  • Economic Growth: We maintain an optimistic outlook for economic growth, as past reforms are poised to support future expansion.

     

  • Investment Cycle: The investment cycle is expected to progress, with increased private sector participation, assuming no major shifts in global dynamics and risk appetite.

     

  • Consumption Recovery: Rural consumption appears well-positioned for a recovery, supported by a low base, falling inflation, and expectations of above-normal monsoons.

     

  • Sector Rotation: Post-election results may lead to sector rotation based on valuations and relative growth prospects.

     

  • Earnings Growth: We anticipate mid-teen earnings improvement at a broad level. Future market performance is expected to be largely dependent on earnings growth.

     

  • Investment Strategies: Large Cap-oriented strategies, such as Large, Flexi, and Multi Cap, appear well-placed. In the thematic space, Banking & Financial Services seem attractive due to relative valuations.

     

  • Mid and Small Cap Allocations: For the medium term, Mid and Small Cap allocations should be approached in a staggered manner through systematic investment routes.

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MONTHLY MARKET UPDATE & OUTLOOK – APRIL’24

Starbucks is not just a coffee shop, and McDonald’s isn’t solely a burger-selling chain

When we think of Starbucks and McDonald’s, our minds typically conjure images of coffeehouses and fast-food chains. However, there’s more to these corporate giants than meets the eye. Their innovative business models redefine the traditional notions of their industries.

Starbucks:

 

As the foremost coffee purveyor globally, Starbucks commands unparalleled customer loyalty. This loyalty translates into a remarkable financial phenomenon: customers have effectively loaned the company a staggering $1.6 billion, interest-free. How is this possible?

 

The cornerstone of Starbucks’ success lies in its ingenious loyalty program, which contributes a substantial 44% to its revenue stream. Through this program, customers load funds onto their gift cards via the app, effectively providing Starbucks with capital for growth and development.

 

This achievement is particularly noteworthy when juxtaposed with the fact that over 3,900 banks in the U.S. hold less than $1 billion in total assets. With approximately 39,000 outlets worldwide and a continual expansion trajectory, Starbucks amasses increasing cash reserves over time.

McDonald’s:

 

While renowned for its hamburgers, McDonald’s is also adominant force in the real estate realm. Holding the title of ‘The World’s Largest Restaurant Company’, McDonald’s boasts a unique business model that emphasizes property ownership.

 

In its 2021 Financial Report, McDonald’s reported assets worth $41.9 billion in property and equipment, ranking it as the 6th largest public real estate company globally.

 

This strategy stems from a visionary concept introduced by Harry J. Sonneborn in 1956: McDonald’s would own the real estate upon which future franchises would be erected. Rather than solely profiting from supplies or royalties, McDonald’s Corporation became the landlord to its franchisees.

 

By acquiring properties and leasing them at considerable markups, supplemented by a percentage of each shop’s gross sales, McDonald’s transformed into a real estate powerhouse. Presently, McDonald’s generates revenue through strategic real estate maneuvers, with its subsidiary handling property transactions and collecting rents from over 40,000 locations across 100 countries.

Quote of the month

Don’t be afraid to take risks and embrace failure. That’s where the best opportunities often lie.

 

Luck plays a role in success but the harder you work and the more you prepare, the luckier you get.

 

-Jim Simons, Founder, Renaissance Technologies

Goldman Sachs Bets $4 Billion on India’s Growth Story

 

All eyes turn to ‘the India decade’

 

ITS NOT INDIA’S DECADE, IT’S INDIA’S CENTURY

Economic Indicators Overview:

 

Manufacturing PMI: India’s Manufacturing Purchasing Managers’ Index (PMI) remained robust at 58.8 in April 2024 (compared to 59.1 in March 2024), marking its 33rd consecutive month in the expansion zone. The acceleration in output and new orders underscores strong demand conditions.

 

Services PMI: India’s services sector displayed strong growth in April, registering a PMI reading of 60.8.

 

GST Collection: Gross GST collections reached INR 2.10 trillion in April 2024, marking a 12.4% year-on-year increase and the highest ever recorded. This concludes the twenty-sixth consecutive month of collections exceeding the INR 1.4 trillion mark, following the previous record of INR 1.87 trillion in April 2023. Rising compliance, increased formalization of the economy, uptick in domestic transaction volumes, and growth in imports have contributed to elevated tax collections.

 

Core Sector Production: The index of eight core sector industries decelerated year-on-year to -5.2% in March 2024, contrasting with a +7.2% jump in February 2024 (revised upwards from +6.7%). Six of the eight constituent sectors recorded positive year-on-year growth, with fertilizers and refinery outputs experiencing a decline.

 

Industrial Production: Factory output growth, as measured by the Index of Industrial Production (IIP), reached a four-month high in February 2024, with a rise of +5.7%, compared to a year-on-year growth of +3.8% in January 2024. This growth was driven by positive year-on-year growth in three major sectors: mining, manufacturing, and electricity.

 

Credit Growth: Scheduled Commercial Bank Credit growth stood at 19.01% year-on-year as of April 19, 2024, compared to a year-on-year growth of 15.92% observed on April 21, 2023.

Equity Market Overview:

 

 

The S&P BSE SENSEX saw a rise of 1.1% in April 2024, mirroring the trend of the NSE NIFTY index.

 

The BSE Mid-cap and Small-cap indices outperformed the S&P BSE SENSEX, boasting gains of 7.1% and 9.6%, respectively.

 

In terms of sectors, Metals, PSU, and Power emerged as the top three performers for the month, recording gains of 10.8%, 10.0%, and 7.7%, respectively. Eleven out of BSE’s 13 sectoral indices closed the month in positive territory.

 

Foreign Institutional Investors (FII) flows into equities turned negative for April 2024, amounting to -$1.3 billion, following a positive flow of +$4 billion in March 2024.

 

On the other hand, Domestic Institutional Investors (DIIs) remained net buyers of Indian equities, with investments totaling +$5.3 billion, compared to +$6.78 billion last month.

 

In the year-to-date 2024, Net Foreign Institutional Investors (FII) Flows stood at +$0.04 billion, while net Domestic Institutional Investors (DII) investments in the cash markets amounted to +$18.36 billion, surpassing Foreign Institutional Investors (FII) investments.

Fixed Income:

 

In April 2024, while yields in the Indian fixed income market experienced an uptick mirroring global trends, the increase in Indian Government Securities (IGB) yields remained relatively subdued.

 

Since the end of March, the G-sec yield curve fluctuated within a range of 15-20 basis points (bps), with a relatively muted impact on corporate bonds ranging between 10-14 bps across the curve. This is in contrast to global trends, where yields saw a broader increase of 20-40 bps following a repricing of global asset prices during the month.

 

The 10-year G-sec yield in April 2024 fluctuated between 7.10% and 7.23% before closing the month at a slightly higher rate of 7.20%. This marks a slight increase compared to March 2024 (7.05%), February 2024 (7.08%), and January 2024 (7.14%). The average 10-year term premia improved to approximately 13 bps during the month, compared to the previous month where it remained relatively flat.

 

Monetary Policy: In its April 2024 policy review, the Reserve Bank of India (RBI) opted to maintain the status quo on both policy rate and stance. Despite anticipating robust economic growth and a potential decrease in inflation for FY25, the RBI underscored several factors posing upside risks to inflation. These include food inflation, potential climate-related shocks, escalating geopolitical tensions, and fluctuations in crude oil prices.

 

Liquidity: Core liquidity, which comprises system liquidity combined with Government balances, experienced a decline from Rs. 2.4 trillion at the end of March 2024 to approximately Rs. 1.5 trillion by the end of April 2024. This decrease was attributed to several factors, including cash leakage resulting from heightened seasonal cash demand, actions undertaken by the Reserve Bank of India (RBI) such as interventions and forex swap maturities, and an increased Cash Reserve Ratio (CRR) provisioning requirement.

Looking Ahead:

 

India’s growth trajectory is poised to remain positive, bolstered by a convergence of favorable factors. FY24 witnessed robust performance across all market segments, with mid and small caps particularly thriving.

 

Despite global challenges such as geopolitical tensions and commodity price fluctuations, the domestic economy has demonstrated resilience. Various indicators, including robust power demand, recovering rural consumption, vibrant capital markets, increasing corporate investment, and external demand growth, have fostered a conducive investment environment, potentially propelling economic expansion.

 

A noteworthy aspect of India’s growth narrative is the uptick in capacity utilization, primarily driven by cyclical and capital-intensive sectors. This trend suggests that businesses are investing to meet the escalating demand within the economy.

 

While the overall outlook for India appears positive, valuations persist at elevated levels across the board, albeit with exceptions like Large Banks and select utilities and commodities. Elevated valuations, coupled with rising bond yields, contribute to a reduction in equity risk premium.

 

The ongoing election cycles in various countries may trigger policy shifts, potentially heightening volatility and uncertainty in the latter half of the year. Consequently, adopting asset allocation strategies becomes crucial for effective risk management.

 

Aligning asset allocation with investment objectives and risk tolerance is essential for optimizing risk-return dynamics. Asset allocation funds, which invest across multiple asset classes, can mitigate volatility and offer a more balanced portfolio mix.

 

From an equity standpoint, Large Cap-oriented strategies such as Large/Flexi/Multi Cap strategies seem well-positioned in the current scenario. Additionally, within thematic investments, the Banking & Financial services sector appears compelling based on relative valuations.

Posted on

MONTHLY MARKET UPDATE & OUTLOOK – MARCH’24

Japan’s Nikkei 225 completes a roundtrip after 34 years

The Nikkei 225, an index encompassing the top 225 Japanese companies, has recently surged to levels not seen since 1989. This resurgence is noteworthy given the historical context surrounding the index’s previous peak.

 

On December 29, 1989, amidst Japan’s economic boom years, the Nikkei achieved an all-time high of 38,915. This period, spanning from around 1986 to1990, was characterized by significant economic growth. However, the subsequent downturn, often referred to as Japan’s “lost decades,” marked a prolonged period of economic stagnation.

 

The decline in the stock market in 1990 was precipitated by tightening monetary policies and stricter regulations on the real estate market. This downturn underscored the challenges Japan faced in maintaining its economic momentum.

 

Recent upswings in Japanese shares can be attributed to several factors. The implementation of a redesigned tax-free government stocks program for individuals, known as NISA, has played a role in bolstering investor sentiment. Additionally, there is optimism surrounding the prospect of the Japanese economy returning to a semblance of normalcy after years of deflation.

 

Furthermore, the Japanese market has benefited from gains in US tech shares, with particular attention drawn to the performance of chip giant Nvidia. This transpacific synergy underscores the interconnectedness of global markets and highlights the influence of external factors on Japanese equities.

 

In conclusion, the resurgence of the Nikkei 225 index reflects a convergence of domestic and international factors shaping the Japanese market. As we continue to monitor these developments, it is imperative to maintain a nuanced understanding of the underlying dynamics driving market trends.

Quote of the month

“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.”

 

“The essence of investment management is the management of the risks, not the management of the returns”

 

– Ben Graham, financial analyst, investor and professor (Father of Value Investing)

India emerges as preferred investment destination for Swedish businesses

Investment guru Jim Rogers says Indian economy in a ‘sweet spot’

 

Blackstone plans to invest $25bn in India over 5 years

 

India committed to get more investments from Singapore

 

India is now the No. 1 investment target country among Japanese Companies

 

It’s hard to be in India and not be excited: Jefferies CEO Richard Handler

 

India is the next big playground for AI: Samsung VC, CEO JH Han

 

On India, we are very bullish. This is not just this year and next year. We forsee that India will be growing for the next 25 years, provided the reforms continue: Borge Brende, President, World Economic Forum

Economic Indicators Overview:

 

Manufacturing PMI: The India Manufacturing PMI surged to a 16-year high of 59.1 in March 2024, up from 56.9 in February 2024. This remarkable increase was propelled by a surge in output and new orders. Notably, the index was driven by heightened inflows from both domestic and export markets, signaling sustained robust demand trends.

 

Goods and Services Tax (GST) Collection: March 2024 witnessed gross GST collections of INR 1.78 trillion, marking an impressive 11.5% year-on-year growth and securing the second-highest collection ever recorded. This achievement also marked the twenty-fifth consecutive month of collections surpassing the INR 1.4 trillion mark, following the record collections of INR 1.87 trillion in April 2023. Factors such as rising compliance, increased formalization of the economy, a surge in domestic transaction volumes, and enhanced administrative efficiency have collectively contributed to this buoyant tax collection trend.

 

Core Sector Production: In February 2024, the index of eight core sector industries exhibited a robust year-on-year growth of +6.7%, outpacing the +4.1% jump observed in January 2024 (revised upwards from +3.7%). This growth momentum represented the fastest pace in three months. Notably, seven of the eight constituent sectors recorded positive year-on-year growth, with only fertilizers experiencing a decline.

 

Credit Growth: As of March 8th, 2024, scheduled commercial bank credit growth surged to 20.41% year-on-year, a notable acceleration from the 15.68% growth observed on March 10th, 2023.

 

Inflation: February’s Consumer Price Index (CPI) inflation rate dipped to a 4-month low of 5.09%, decelerating from 5.1% in January 2024. However, food inflation accelerated, reaching 8.66%. Meanwhile, Wholesale Price Index (WPI) inflation moderated from January 2024, with the February 2024 print at 0.20%, down 7 basis points from January 2024. Notably, WPI inflation remained positive for the fourth consecutive month.

 

Trade Deficit: Indian merchandise exports surged by +11.9% year-on-year to $41.4 billion in February 2024, while imports increased by +12.2% year-on-year to $60.11 billion. Consequently, the merchandise trade deficit widened by +12.91% to $18.91 billion as imports outpaced exports in growth rate.

Equity Market Overview:

  • In March 2024, the S&P BSE SENSEX witnessed a 1.6% rise, indicating positive momentum in the market.

  • However, the BSE Mid-cap and Small-cap indices didn’t fare as well, with performances of -0.01% and -4.54% respectively, underperforming the S&P BSE Sensex.

  • Among sectors, Capital Goods, Auto, and Metals emerged as the top performers, registering gains of +6.1%, +5.0%, and +5.0% respectively. Notably, six out of BSE’s 13 sectoral indices ended the month in positive territory.

  • Foreign Institutional Investors (FIIs) showed a positive sentiment towards equities in March 2024, with net inflows amounting to +$3.7 billion, following a modest inflow of +$0.4 billion in February 2024.

  • On the other hand, Domestic Institutional Investors (DIIs) continued to exhibit a bullish stance on Indian equities, with net purchases totaling +$6.78 billion, up from +$3.06 billion in the previous month.

  • In the calendar year 2024, while net Foreign Institutional Investors (FII) flows stood at +$1.08 billion, net Domestic Institutional Investors (DII) investments in the cash markets amounted to +$13.06 billion, surpassing Foreign Institutional Investors (FII) investments.

     

Fixed Income:

  • In its early April policy review, the RBI opted to maintain the status quo on both policy rate and stance, aligning with market expectations. While the RBI anticipates robust growth and a decline in inflation for the fiscal year 2024-25 (FY25), it emphasized the potential upside risks to inflation stemming from factors such as food inflation, climate-related shocks, escalating geopolitical tensions, and fluctuations in crude oil prices.

     

  • Core liquidity, comprising system liquidity and government balances, saw improvement from INR 2 trillion at the end of February 2024 to approximately INR 2.4 trillion by the end of March 2024. This enhancement was largely driven by RBI interventions and the maturity of forex swaps. Following a period of tight liquidity conditions throughout the second half of fiscal year 2023-24 (2H FY24), system liquidity eased in March, averaging around negative INR 43,000 crore (compared to an average negative of around INR 2.1 trillion in January 2024 and negative INR 1.9 trillion in February 2024), supported by robust government spending and inflows related to forex activities.

     

  • Fixed income yields remained range-bound throughout March 2024. The 10-year Government Securities (G-sec) yield responded to global cues, including movements in crude oil prices, US Federal Reserve policy decisions, and US treasury yields, fluctuating within the range of 7.03% to 7.10% during the month. The 10-year G-sec closed the month slightly lower at 7.05%, compared to 7.08% in February 2024 and 7.14% in January 2024. Additionally, the 10-year term premium remained relatively stable or showed marginal negativity.

 

Expectations of robust growth numbers, moderation in inflation and improving external balances provides RBI leeway to hold rate for longer, while assessing global uncertainty.

Events to watch out for in April 2024:

 

  • Q4FY24 Earnings Season: Beginning in April 2024, the Q4FY24 earnings season commences against the backdrop of a previous quarter that surpassed expectations. The Indian economy displays resilience, marked by cooling core inflation and promising growth projections. Recoveries in exports and demand could potentially lead to earnings that exceed expectations.

     

  • General Election Developments: Starting on April 19th, 2024, voting for the Indian General Elections will unfold over six weeks across seven phases. Market watchers closely monitor these elections as policy continuity and support hinge on the electoral outcomes

    .

  • Commodity Prices: In late March 2024, gold reached an all-time high, registering a nearly 10% increase in 2024. Factors such as central bank buying and expectations of rate cuts have contributed to this surge. Additionally, weakening US dollar and declining yields have bolstered commodity prices. Oil markets remain buoyed near five-month highs due to OPEC+ production cuts, coupled with strong demand outlooks from China and the US. Commodity markets serve as crucial indicators for global markets.

     

  • Positive Economic Indicators: The Indian economy continues to display strength supported by demographic advantages, policy reforms, and structural changes. Key leading indicators such as tax collections, industrial activity, and power demand remain robust. Moderating inflation and a potential increase in private sector capital expenditure are additional positive drivers.

  • Attraction for Global Investors: India is increasingly becoming a preferred destination for global investors due to favorable macroeconomic conditions, expectations of policy continuity, etc. This trend may lead to heightened inflows.

  • Elevated Valuations: While the broader outlook for India appears positive, valuations remain high overall, with exceptions observed in sectors such as large banks, select utilities, and commodities.

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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