Macro and
Equity Market
Outlook
Equity Market
Outlook
GLOBAL MACRO & MARKETS
India’s NSE NIFTY index ended the month of January 2025 negative
(-0.6%). Among major global indices, the S&P500 (+2.7%), Morgan
Stanley Capital International (MSCI) World (+3.5%), the Euro 50
(+8.0%), the Japanese NIKKEI (-0.8%) ended the month, January
2025 with largely positive returns. Performance was positive
among Emerging Market (EM) indices as well, with the Morgan
Stanley Capital International Emerging Markets (MSCI EM), Hang
Seng (Hong Kong), the BOVESPA Brazil (BVSP) recording sequential
returns of (+1.7%), (+0.8%), and (+4.9%) respectively.
The London Metals Exchange (LME) Index rose by (+1.6%) in January
2025, driven by uncertainty in global trade and tariff hikes by major
consumers. West Texas Intermediate (WTI) and Brent Crude rose
MoM, by (+1.1%) and (+2.8%), respectively.
The Dollar index remained flat (-0.1%), through January 2025, with
the US Dollar (USD) appreciating vis-à-vis Emerging Market (EM)
currencies (-1.6%) and appreciating against the Indian Rupee (INR)
on the spot market (+1.2%). India 10Y G-Sec yields fell by (-6 bps),
while US 10Y G-Sec yields fell by 3 bps, and the German Bund yield
rose by (+9 bps), with rates settling at 6.7%, 4.53% and 2.46%,
respectively.
Domestic Macro & Markets
The BSE SENSEX (-0.8%) fell in January 2025, in line with the NSE NIFTY
Index. The BSE Mid-cap index and the BSE Small-Cap index
underperformed the BSE SENSEX, falling by (-7.2%), and (-9.5%) over
the month, respectively. Sector-wise, Realty, Consumer durables,
Healthcare were the top underperformers over the month, January
2025 clocking (-13.2%), (-10.2%), and (-7.7%), respectively. All of BSE’s
13 major sectoral indices ended the month, January 2025 in red.
Net Foreign Institutional Investors (FII) flows into equities were
negative for January 2025 (at -$9.0 Bn, following +$1.8 Bn in
December 2024). Domestic Institutional Investors (DIIs) remained
net buyers of Indian equities for the 18th consecutive month (+$9.8
Bn, from +$4.0 Bn last month, December 2024).
India's high frequency data update:
Robust Goods and Services Tax (GST) collections, stable retail
inflation, income tax relief in the Union Budget, and improvement in
domestic banking system liquidity augurs well for the Indian
economy.
Purchasing Managers’ Index Manufacturing PMI:
India’s Manufacturing Purchasing Managers’ (PMI) in January 2025
accelerated month on month to 57.7 (vs 56.4 in December 2024),
remaining in expansion zone (>50) for the 42nd straight month. The
slowdown was a result of faster pace of growth in new orders, and
manufacturing performance remained comfortably in the expansion
zone.
Goods and Services Tax (GST) Collection:
Gross collections of INR 1.96 Tn (+12.3% YoY) in January 2025
concluded the thirty fifth consecutive month of collections over the
INR 1.4 Tn mark, following previous record collections of INR 2.1 Tn in
April 2024. Rising compliance, higher output prices, festive season
demand, rising collections from imports and domestic transaction
volume uptick has driven elevated tax collections.
Core Sector Production:
The index of eight core sector industries grew by (+4.0%) YoY in
December 2024, against a (+4.4%) growth in November 2024, as an
unfavourable base effect came into play. 6 out of eight constituent
segments grew YoY, driven by Coal production (+5.3% YoY).
Industrial Production:
Factory output growth as measured by the Index of Industrial
Production (IIP) accelerated MoM to (+5.2%) in November 2024, vs a
growth of (+3.5%) YoY in October 2024, driven by positive, and YoY
growths in 3 of 3 major sectors- Manufacturing, Mining, Electricity.
Credit growth:
Scheduled Commercial Bank Credit growth reached (+11.47%) YoY
as of 10th January 2025 against a YoY growth of (+20.28%) as
observed on 12th January 2024, as a strong base effect came to
play.
Inflation:
December 2024 Consumer Price Index (CPI) inflation rate
decelerated MoM to (5.22%), down from (5.48%) in November 2024.
Food inflation came in at a slower pace MoM, at (7.69%), down from
(8.2%) in the previous month. The Wholesale Price Index (WPI)
inflation accelerated sequentially in December 2024, with the print
at (+2.37%), 48 bps up from November 2024.
Trade Deficit:
Indian Merchandise Exports fell by (0.99%) YoY to $21.9 Bn in
December 2024, while Imports rose by (+4.9%) YoY to $59.95 Bn.
Merchandise trade deficit narrowed by (16.95%) YoY to $21.94 Bn.
Events to watch out for in February 2025:
India and United States (US) earnings Seasons: So far, the
earnings season in India as well as in United States (US) has
been better than pre quarter expectations in aggregate.
The currency movement and the Oil Market volatility will
remain key events for markets to watch out for.
Monthly Performance for Key Indices:
Source: Bloomberg
.*Calendar year returns.
Note:Market scenarios are not reliable indicators for current or future performance. The same should not be construed as investment advice or as any research report/research recommendation.
Past performance may or may not be sustained in future.
Note:Market scenarios are not reliable indicators for current or future performance. The same should not be construed as investment advice or as any research report/research recommendation.
Past performance may or may not be sustained in future.
Market View
Union budgetary proposals with their support to Consumption
through tax cuts while maintaining fiscal prudence and capex
thrust are expected to have a positive impact on the slowing
growth.
Reserve Bank of India also reduced Repo rates by 25 basis points
which may also help to revive demand on lower interest cost
burden.
Further the recent market pull back has helped reduce the excess
valuations or premiums in some pockets with Large cap
valuations closer to long term averages, while the premium in
Mid/Small cap segment though elevated has moderated.
Looking ahead the equity markets are likely to reflect the earnings
growth.
Looking ahead the equity markets are likely to reflect the earnings
growth.
Global policy stance especially the tariff actions by the US and
responses from impacted countries is likely to impact the market
sentiments.
Large Banks, Consumer, Power along with structural themes like
urbanization, premiumization and localization of manufacturing
appear well placed in the current context.
Large Cap & Large Cap oriented strategies along with hybrid funds
appear better placed on risk-reward basis, while Mid/Small cap
allocation may be considered in a staggered manner through
systematic investments.
Overall, we believe while the market may consolidate in the near
term the domestic fundamentals / lead indicators remain
supportive and offer reasonable possibilities from a medium-term
perspective.
Chart of the Month:
The Central government stuck to the fiscal consolidation path in
the first full budget of its third term for Financial Year (FY26): It
targeted fiscal deficit at 4.4% of Gross Domestic Product (GDP) in
FY26 from the revised estimate of 4.8% in FY25 (5.6% in FY24).
Central government capex is budgeted to remain flat (over FY25)
as a share of Gross Domestic Product (GDP), at 3.1%. Income tax
relief announced to Indian households may help improve
domestic consumption.
Source:
NIMF Research, CEIC (RE- Revised Estimates) (BE- Budget Estimate) considered for FY26 Data
Disclaimer:
The views expressed herein are based on publicly available information and
other sources believed to be
reliable. It is issued for information purposes only and is not an offer to sell or a solicitation to
buy/sell any mutual fund
units/securities. It should be noted that the analysis, opinions, views expressed in the document are
based on the Budget
proposals presented by the Honorable Finance Minister in the Parliament on July 22, 2024 and the said
Budget proposals
may change or may be different at the time the Budget is passed by the Parliament and notified by the
Government. The
information contained in this document is for general purposes only and not a complete disclosure of
every material fact
of Indian Budget. For a detailed study, please refer to the budget documents available on
http://www.indiabudget.gov.in
The information herein above is meant only for general reading purposes and the views being expressed
only constitute
opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide
for the readers.
The document has been prepared on the basis of publicly available information, internally developed
data and other
sources believed to be reliable. The sponsors, the Investment Manager, the Trustee or any of their
directors, employees,
Associates or representatives (‘entities & their Associate”) do not assume any responsibility for, or
warrant the accuracy,
completeness, adequacy and reliability of such information. Recipients of this information are advised
to rely on their own
analysis, interpretations & investigations. Readers are also advised to seek independent professional
advice in order to
arrive at an informed investment decision. Entities & their associates including persons involved in
the preparation or
issuance of this material, shall not be liable in any way for any direct, indirect, special,
incidental, consequential, punitive,
or exemplary damages, including on account of lost profits arising from the information contained in
this material.
Recipient alone shall be fully responsible for any decision taken on the basis of this document.
The sectors mentioned are not a recommendation to buy/sell in the said sectors. Details mentioned
above are for
information purpose only.