Macro and
Equity Market
Outlook
Equity Market
Outlook
GLOBAL MACRO & MARKETS
India’s NSE NIFTY index rose to higher levels in August 2024, (+1.1%)
MoM, as Indian markets saw volatility owing to the weaker than
expected United States of America (USA) employment data and
the unwinding of the Yen Carry Trade. Major global indices, the
S&P500 (+2.3%), the Euro 50 (+1.7%), the Morgan Stanley Capital
International (MSCI) World (+2.5%), and the Japanese NIKKEI (-1.2%)
ended the month, August 2024 with mixed results on a sequential
basis. Performance was largely positive in August 2024 among the
Emerging Market (EM) indices, with the Morgan Stanley Capital
International Emerging Markets (MSCI EM), the Hang Seng (Hong
Kong), the BOVESPA Brazil (BVSP) recording sequential growths of
(+1.4%), (+3.7%), and (+6.5%), respectively.
The London Metals Exchange (LME) Metals Index rose (+2.8%) in
August 2024, as the dollar weakened. The West Texas Intermediate
(WTI) and Brent Crude fell MoM, by (-5.6%) and (-2.4%), respectively,
as the United States (US) economic data remained weak, China
demand slowing down, despite tensions in the Middle East
looming.
The Dollar index depreciated by (-2.3%) through August 2024, with
the US Dollar (USD) remaining flat vis-à-vis Emerging Market (EM)
currencies and remaining flat against the Indian Rupee (INR) on
the spot market (+0.2%). India 10Y G-Sec yields fell by (-6 bps), while
US 10Y G-Sec yield fell by (-13 bps), and the German Bund yield fell
by (-0.5 bps), with rates settling at 6.86%, 3.9% and 2.29%
respectively.
Domestic Macro & Markets
The BSE SENSEX (+0.8%) rose in August 2024, in line with the NSE
NIFTY index. BSE Mid-cap (+0.9%) and BSE Small-cap index (+1.2%)
outperformed the BSE Sensex for the month. Sector-wise,
Healthcare, Tech and Consumer Durables were the top 3
performers over the month, August 2024, clocking (+6.6%), (+4.6%),
and (+4.4%), respectively.
Net Foreign Institutional Investors (FII) flows into equities were
positive for August 2024 (+$ 1.84 Bn, following $ 3.34 Bn in July 2024).
The Domestic Institutional Investors (DIIs) remained net buyers of
Indian equities (+$5.75 Bn, from +$2.8 Bn last month, July 2024). In
Calendar Year (CY2024), Net Foreign Institutional Investors (FII)
Flows stood at (+$4.91) Bn, while net Domestic Institutional Investors
(DII) investments in the cash markets stood at (+$37.04) 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.
Purchasing Managers’ Index Manufacturing PMI:
India’s Manufacturing Purchasing Managers' Index (PMI) in August
2024 fell to a six-month low of 57.5 (vs 58.1 in July 2024), remaining in
expansion zone (>50) for the 37th straight month driven by the output
index, and a marked increase in new orders. Input prices declined to a
five-month low.
Goods and Services Tax (GST) Collection:
Gross collections of INR 1.75 Tn (+10% YoY) in August 2024 concluded
the thirtieth consecutive month of collections over the INR 1.4 Tn
mark. Rising compliance, higher output prices, rising collections
from imports and domestic transaction volume uptick has driven
elevated Goods and Services (GST) collections.
Core Sector Production:
The index of eight core sector industries decelerated to (-6.1%) YoY
in July 2024, against a (+8.5%) jump in July 2023. The growth rate is
up from (+5.1%) in June 2024. 6 out of eight constituent segments
grew YoY, driven by steel production (7.2% YoY).
Industrial Production:
Factory output growth as measured by the Index of Industrial
Production (IIP) decelerated MoM to (-4.2%) in June 2024, vs a
growth of 5.9% YoY in May 2024, driven by positive, and stable YoY
growths in 3 major sectors- Mining, Manufacturing and Electricity.
Credit growth:
Scheduled Commercial Bank Credit growth reached (+13.60%) YoY
as of 9th August 2024 against a YoY growth of (+19.82% as
observed on 8th September 2023, as a strong base effect came to
play post the merger of HDFC and HDFC Bank.
Inflation:
July’s 2024 Consumer Price Index (CPI) inflation rate decelerated
MoM to (+3.54%), down from (+5.08%) in June 2024. Food inflation
came in at a slower pace, at 5.42% YoY. Wholesale Price Index (WPI)
inflation accelerated sequentially in July 2024, with the print at
(+2.04%) YoY, 68 bps down from June 2024
Trade Deficit:
Indian Merchandise Exports fell by (-1.5%) YoY to $34 Bn in July 2024,
while Imports rose by (+7.6%) YoY to $57.5 Bn. Merchandise trade
deficit widened by (-23.7%) YoY to $23.5 Bn.
Events to watch out for in September 2024:
Monsoon:
Till August 30 2024, cumulative rainfall was 6.9% above long-term
average (LTA) while weekly rainfall was 52% above long-term
average (LTA). On a cumulative basis, rainfall remained excess in
central India and southern India, normal in northern India, and
deficient in east and north-east India. Out of the 36 sub-divisions,
till date, 5 have received deficient rainfall, 19 have received normal
rainfall, and 12 have received excess rainfall. Trends on sowing are
encouraging so far and bodes well for agricultural output
Oil Prices:
Geopolitical tensions, weaker than normal demand from China,
production cuts from The Organization of the Petroleum Exporting
Countries (OPEC+) members have led to volatile but muted oil
prices. Supply side constraints is expected to ease as The
Organization of the Petroleum Exporting Countries (OPEC+)
members will start to gradually unwind their recent layer of supply
cuts of 2.2 Mn bpd as on Aug, 2024. Oil market developments
remain a key monitorable for global markets and monetary policy
setting.
China Stimulus:
Weak consumer sentiments and below par manufacturing activity
has led to weak consumer demand. Broader stimulus directed
towards property and consumer segments are key events to
watch out for.
Other things to watch out for:
Festive season demand in Indian for autos and other durables, Any
shift in Reserve Bank of India (RBI’s) policy stance, the Federal Open
Market Committee – The Fed (FOMC) monetary policy stance
remain other 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
August witnessed a slew of events ranging from geo-political
tensions, rate hikes by Japan’s Central Bank, unwinding of Yen
carry trade, weaker macros from US etc. However Indian equities
recovered to end the month on a positive note.
India's real GDP in FY24 was 20% higher than pre-COVID levels,
marking a 4.6% CAGR from FY20 despite a 5.8 % contraction in FY21.
Most of the lead indicators remain in positive territory though there
is some slowdown in discretionary spending.
Overall, the long-term construct remains for optimistic for the
economy given the Corporate Balance Sheets, Bank Balance
Sheets and Governments Fiscal position.
Recovery in International demand conditions and local rural
recovery can provide some upside and going forward its
estimated that market performance may be largely dependent
on earnings growth.
Current equity market valuations appear to reflect near term
growth possibilities in large pockets of the market. At the prevailing
higher valuations any unexpected news-flow can potentially lead
to sharp volatility
From a market cap perspective, the Mid/Small cap space
continues to trade at a premium to large caps supported by
strong domestic flows.
In our view Large Cap oriented strategies like Large/Flexi/Multi Cap
appear better placed over the medium term while investors
seeking better downside protection may consider asset allocation
products like Multi Asset Allocation, Dynamic Equity etc
Long term investors with appropriate risk appetite can consider
Mid and Small Cap allocations in staggered manner through the
systematic route.
Chart of the Month: No complaints from the monsoon:
Headline Consumer Price Index (CPI) moderated to a five-year low
of 3.5% YoY in July 2024, partly driven by favourable base effect:
Consumer Price Index (CPI) has remained within the 2-6%
confidence band in 10 out of the last 12 months. Inflation has turned
more benign, and core inflation (3.35% YoY) provides comfort for
increase in odds of change in policy stance by the Reserve Bank of
India (RBI) in the next Monetary Policy Committee (MPC) meeting.
Source:
NIMF Research, CEIC
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