Dear Investors,
CY 2024 was a volatile year for Indian equities. The Nifty crossed the 26,000 level, hitting its record high in September 2024. Volatility gripped the market in the last 3 months and Nifty closed the year below the 24,000 level, down nearly 2,500 points from its record high. The broader market outperformed the Nifty in 2024, with Nifty 500 giving 16% return. Small cap was the best performing segment in 2024 (with 26% return), followed by midcap (23.7% return) and large cap (12.8% return).
The Trump Administration will take office in January 2025 and is expected to make major policy announcements, which global markets will be watching keenly. While the new Administration’s stated policy stance may benefit India, some of the policies may be negative for India as well.
Despite rate cuts by the Fed, the RBI had held the repo rate flat at 6.5% citing inflation concerns. In the December 2024 Monetary Policy Committee (MPC) meeting, the then RBI Governor, Shakti Kanta Das cited high inflation (particularly food inflation) as a concern and justification for keeping interest rates unchanged.
Nikkei, DAX and FTSE closed the year with gains, while CAC closed the year almost flat on YOY basis. Hang Seng remained volatile and range-bound for the first 8 months of the year, but had a strong rally in September and October posting 17% gains on a YOY basis in 2024. The EM basket as a whole (MSCI EM Index) underperformed the S&P 500.
The sharp correction has brought valuations to reasonable levels in the last few months, but concerns linger about certain pockets of the market due to earnings downgrades. The big correction has brought Nifty valuations below the long term (10 year) historical average valuations. India is the 5th largest economy in terms of GDP and is expected to be the 3rd largest economy by 2033. Historical data suggests that improving corporate profits to GDP ratio indicates long term secular bull market for Indian equities. Foreign institutional investors (FIIs) were net sellers in 2024 due to a variety of factors including relative valuations of India versus China, China’s outperformance, earnings outlook downgrade and strengthening of US dollar. Domestic investors continued to support Indian equities with net purchase of more than Rs 4.4 lakh crores through mutual funds
As far as commodities are concerned precious metals slid during the month against the strengthening dollar. Gold may remain subdued till US Treasury Bond yields remain firm. Crude oil firmed up by couple of dollars per barrel which was an increase of 5.2% MOM, as concerns over the conflict in Middle East lingers on.
Inflation (both WPI and CPI) cooled off in November 2024. The 10-year G-Sec yield also eased by 33 bps in 2024 in anticipation of rate cuts closing the year at yield of 6.87%. However, cut in FY 2025 GDP growth forecast by the RBI and cooling inflation can set the stage for rate cuts in 2025 which can lead to lower yields. Yields have softened but there is considerable room for yields to fall further, depending on the monetary policy stance of the RBI. Depreciating Rupee is concern for equity and debt markets.
Financial markets are dynamic, but we will keep adapting to it keeping your financial goals in mind. Assuring you of our best services.
Best Wishes,
Ajoy Agarwal,
(Managing Director)
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