EF Digest - July 2024

Dear Investors,

Equity market closed month of June 2024 at record highs, despite the mayhem in the market on the Lok Sabha election results day, when the market crashed by 6 - 7%. However, final results tally ensured comfortable majority for the NDA and markets rebounded on hopes of policy continuity. The market crossed important psychological levels in July - Nifty crossed the 24,000 level, while the Sensex crossed the 79,000 level. The rally in the equity market was broad based with Nifty 500 gaining 6.9% in June.

FIIs had been net sellers in April and May. In June, FIIs turned net buyer with more than Rs 24,000 crores of net purchases in June. From a long-term perspective, India Growth Story is intact. India's GDP grew by 8.2% in FY 2023-24 exceeding earlier forecasts. Goldman Sachs has revised India's GDP FY 2025 forecast upwards to 6.9% making India the fastest growing G-20 economy. Nifty earnings per share (EPS) grew by 22% in the last 1 year (ending as on 30th June 2024). The market consensus for FY 2024-25 Nifty EPS growth forecast is 15 - 16%. The MSCI India (USD) index with 17% YTD returns has outperformed MSCI EM index (7.7% YTD returns). We expect FIIs to continue investing in India, which along with strong inflows through mutual funds can lead the equity market to much higher levels.

As far as global markets are concerned, US equities continued their strong run with S&P 500 posting 3.5% gain in July. Among the other developed market, the Nikkei closed the month close to its all-time high; the DAX and CAC remained flat, and the Hang Seng was down 2%. The US stock market is currently enjoying its best election year in almost 50 years. The S&P 500 is up almost 18% on a YTD basis. Global risk sentiments are positive, despite voices from Fed that rate cuts may not happen this year.

In the commodities market, gold took a breather after 3 consecutive up months and silver fell nearly 5%. Concerns of rate cuts getting delayed had an impact on the rally in precious metals. However, the US Dollar is weakening which augurs well for gold. We expect gold to resume its rally when the rate cuts draw nearer.

As far as debt market is concerned, the 10 year Government bond yields remained flat at around 7%, while the 1 year (364 day T-Bill) yields softened by 4 bps, indicating gradual mean reversion of the yield curve. The current yields provide attractive investment opportunities for longer duration debt fund investors since they can benefit from price (NAV) appreciation as interest rates fall.

Best Wishes,

Ajoy Agarwal,

(Managing Director)