Dear Investors,
In the month of November 2024, the market ended flattish on a month-on-month basis. The Nifty slipped below the psychologically important 24,000 level. However, the market bounced back after the Maharashtra elections and closed the month above 24,000 levels. The broader market also ended flat on a month on month basis. FIIs continued to be net sellers in November, even though selling abated in November compared to the FII activity in October 2024. Retail investors continued to support the market through mutual fund SIPs. Though the market seem to have bottomed out, gains are likely to be capped since there are concerns about corporate earnings after Q2 earnings disappointed. Q2 GDP growth rate was the slowest in the last 7 years.
US market has rallied after the Presidential Elections. The S&P 500 closed November with 5.7% month on month gains. Among the developed markets, the DAX and FTSE closed the month with gains, while the CAC was down month on month and the Nikkei ended flat. However, the Emerging Markets have been underperforming due to concerns about the impact of the Republican Administration’s trade policies on EMs. The MSCI EM Index was down by nearly 4% month on month and Hang Seng was down 4.4%. India was a relative outperformer among the Emerging Markets.
As far as commodities are concerned, gold and silver prices slipped due to concerns of delay in rate cuts. Crude oil softened by around $2.7 per barrel (for WTI crude) in November. The commodity market will closely watch the Fed FOMC meeting in December 2024. Strong economic data in the US will strengthen the dollar further and provide headwinds to precious metals.
The 10-year G-Sec yield also eased by 20 bps in November, tracking US bond yields and is currently at around 6.75%. However, the 1 year G-Sec yield firmed by 8 bps to 6.62%. The yield curve is flat in the 1 year to 6 year maturity range, indicating economic uncertainty and possible rate cut. WPI inflation remains slightly elevated due to high food prices. The stock and bond market will closely watch the RBI MPC meeting in December, but rate cut is unlikely since the USD is very strong versus the INR. Rate cut may weaken INR further. However, a surprise rate cut may boost both equity and debt markets. The overall situation is favorable for debt markets in the medium to long term. Gilt and longer duration fund investors can benefit from price appreciation as yields decline. However, you should be prepared for volatility in the short term.
The big correction has brought Nifty valuations to reasonable levels, but the risk factors like weak corporate earnings and economic slowdown will cap market upside. We expect market to remain range bound with support at around 24,000 level and profit booking at higher levels. December 2024 is expected to be sluggish month, but January 2025 is expected to be action packed with major events like Trump Administration announcing their first set of policy changes and our Union Budget coming up.
On behalf of our team, I wish you and your families a very happy and prosperous 2025 in advance.
Best Wishes,
Ajoy Agarwal,
(Managing Director)
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