Macro and
Equity Market
Outlook
Equity Market
Outlook
GLOBAL MACRO & MARKETS
India’s NSE NIFTY index ended the month marginally down,
(-0.3%) MoM, in May 2024. The S&P500 (+4.8%), the Euro 50
(+1.3%), the Morgan Stanley Capital International (MSCI) World
(+4.2%), and the Japanese NIKKEI (+0.2%) all ended the month,
May 2024 in positive. Performance was mixed among Emerging
Market (EM) indices, with the Morgan Stanley Capital
International (MSCI) Emerging Markets (EM) and the HANG SENG
(Hong Kong), ending the month, May 2024 in green, with returns
of +0.3% and +1.8%, respectively. The BOVESPA (BVSP) Brazil
and the MOEX RUSSIA index ended the month, May 2024 in
negative, with returns of (-3.0%) and (-7.3%) respectively.
The London Metals Exchange (LME) Metals Index rose (+1.3%) in
May 2024, as base metals demand outpaced tighter supplies, and
manufacturing data from China, the largest consumer, grew at a
faster pace
The West Texas Intermediate (WTI) and Brent Crude fell MoM, by
(-6.0%) and (-7.1%) respectively even as oil cuts by The
Organization of the Petroleum Exporting Countries (OPEC+) may
extend into the year 2025.
The Dollar index depreciated by (-1.5%) through May 2024, with
the Dollar appreciating by +1.1% vis-à-vis Emerging Market
(EM) currencies and remaining flat against the Indian Rupee
(INR) on the spot market. India 10Y G-Sec yields fell by 21
bps, while US 10Y G-Sec yield fell by 18 bps, and the German
Bund yield rose by 8 bps, with rates settling at 6.97%, 4.50%
and 2.66% respectively.
Domestic Macro & Markets
The S&P BSE SENSEX (-0.7%) remained flat in May 2024, in line
with the NSE NIFTY index. BSE Mid-cap and Small-cap indices
outperformed the S&P BSE Sensex, with performances of +2.3%
and (-0.1%) respectively. Sector-wise, Capital Goods, Power,
and Metals were the top 3 performers over the month, May 2024,
clocking +11.2%, +6.6%, and +4.7%, respectively. 6 of S&P
BSE’s 13 sectoral indices ended the month May 2024 in green.
Net Foreign Institutional Investors (FII) flows into equities
were negative for May 2024 (-$ 3.15 Bn (Up to May 29th, 2024,
following (-$ 1.3) Bn in April 2024). The Domestic
Institutional Investors (DIIs) remained net buyers of Indian
equities (+$6.43 Bn (Up to May 30th, 2024), from +$5.30 Bn
last month). In CYTD2024, Net Foreign Institutional Investors
(FII) Flows stood at -$2.8 Bn, while net Domestic
Institutional Investors (DII) investments in the cash markets
stood at +$19.17 Bn, outpacing Foreign Institutional Investors
(FII) investments.
India's high frequency data update:
Record levels of Goods and Services Tax (GST) collections,
stable retail inflation, deflated input inflation, rising core
sector outputs, and elevated credit growth augurs well for the
Indian economy.
Manufacturing PMI:
India’s Manufacturing Purchasing Managers' Index (PMI) in May
2024 remained strong at 57.5 (vs 58.8 in April 2024),
remaining in expansion zone for the 34th straight month driven
by accelerating new export orders and jobs growth.
GST Collection:
Gross collections of INR 1.73 Tn (+10% YoY) in May 2024
concluded the twenty seventh (27th) 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, increased formalization of the economy, and
domestic transaction volume uptick has driven elevated tax
collections.
Core sector production:
The index of eight core sector industries accelerated YoY to
+6.2% in April 2024, against a +6% jump in March 2024 (Revised
upwards from +5.2%). On a sequential basis, however, the index
fell by (-8.1%), the sharpest pace in last 12 months.
Typically, April 2024 witnesses a contraction in production as
compared to March 2024.
Industrial Production:
Factory output growth as measured by the Index of Industrial
Production (IIP) decelerated to (-4.9%) in March 2024, vs a
growth of +5.7% YoY in February 2024, driven by positive YoY
growths in 3 major sectors- Mining, Manufacturing and
Electricity.
Credit growth:
Scheduled Commercial Bank Credit growth reached 19.54% YoY as
of 17th May 2024 against a YoY growth of 15.42% as observed on
19th May 2023.
Inflation:
April’s 2024 Consumer Price Index (CPI) inflation rate reached
a 11-month low of 4.83%, decelerating from 4.85% in March
2024. Food inflation decelerated, coming in at 7.87%.
Wholesale Price Index (WPI) inflation accelerated from March
2024, with the April 2024 print at +1.26%, 73 bps up from
March 2024, as WPI inflation printed positive for the sixth
month in a row.
Trade Deficit:
Indian Merchandise Exports rose by +1.07% YoY to $34.99 Bn in
April 2024, while Imports rose by +10.26% YoY to $54.09 Bn.
Merchandise trade deficit widened by +32.29% YoY to $19.1 Bn
as oil exports grew YoY.
Events to watch out for in June 2024
The Federal Open Market Committee (FOMC) meet:
The Federal Reserve meets on June 11th-12th 2024, with rate
cuts unlikely. A year since the Federal Funds rate were last
raised to 5.25%-5.5% in July 2023, the fed maintains a
“robust”, with a keen eye on inflation and job market numbers.
Economic activity in the USA may continue to expand, and rate
cut decisions will be data driven.
Heat/ Monsoon:
India Meteorological Department (IMD) retained its long-range
south-west monsoon forecast at above normal long period
average (LPA) in its second forecast release. The forecast of
above-normal rainfall augurs well for kharif sowing this year,
though the distribution of rainfall across different regions
and states will play a crucial role in determining the quantum
of food grain production. As of 24 May 2024, overall water
levels in reservoirs are 5% below normal, which deviates from
the 10-year average.
Central Government Formation and Budget:
Key catalysts for the market will be among others, the cabinet
formation post-election, first 100 days agenda/major policy
announcements, and the FY24-25 full year budget in July 2024.
Ministry allocations, policy trajectory and budget priorities
remain a key monitorable for the market over June 2024.
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
The biggest takeaway of the general election outcome is the
likely policy continuity across key facets like development
and reforms. This along with India’s strong fundamentals,
domestic demand resilience, and policy support may help
provide buffers against external shocks.
Hence, we maintain our optimistic view in terms of economic
growth as reforms of the past are enough to support future
growth.
Investment cycle is expected to continue with greater
participation from private sector, assuming no major shifts in
the global dynamics and risk appetite.
Consumption especially the rural part appears well placed for
a recovery supported by low base, falling inflation and
expectations of above normal monsoons.
Post the election results we can expect sector rotation based
on valuations and relative growth prospects.
We believe mid-teen earnings improvement is possible at a
broad level. Going forward its estimated that market
performance may be largely dependent on earnings growth.
In our view Large Cap oriented strategies like
Large/Flexi/Multi Cap appear better placed while on the
thematic space Banking & Financial services space appears
interesting on relative valuations.
In line with the medium term perspective Mid and Small Cap
allocations in staggered manner through the systematic route
Chart of the month :
Indian exports have been under pressure in the last few quarters. There are now signs of recovery in exports. For instance, new export orders within India Purchasing Managers’ Index (PMI) manufacturing survey rose to a 13-year high of 57.3 in May 2024 (vs. 56.1 in April 2024), as firms reported gains from clients across most regions.
Source:
NIMF Research, CEIC
Disclaimer: 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.