The Month that was : February
Indian markets ended February on a positive note, with the Nifty posting a return of 1.2%. Sectoral indices were mostly positive, except for FMCG, which declined by 2.2%. Best performing sectors included oil & gas (+6.7%), auto (+6.4%), and realty (+6.3%). Mid-cap (-0.5%) and small-cap (-0.3%) indices underperformed the Nifty. Global markets mostly ended positively, with Shanghai, Japan, and Hong Kong being major gainers. The US markets, SPX and Nasdaq, reached record highs, up 5.2% and 6.1% respectively, driven by optimism about artificial intelligence.
Key developments included Indian government's projection of a lower fiscal deficit for FY2025 in Union Budget, US FOMC maintaining policy rates, and RBI keeping the repo rate unchanged. On the domestic economic front, January CPI inflation moderated to 5.1%, while December IIP growth increased to 3.8%. India's GDP growth for 3QFY24 came in at 8.4% which was better than estimates. FPIs sold US$592 mn of Indian equities, while DIIs bought US$3.1 bn.
Market Outlook
The outlook for Indian markets remains positive, driven by strong domestic macro economic parameters, expectation of stable political outcome in upcoming General Election and supportive global liquidity going ahead as interest rate hike cycle reverses during second half of 2024. On going capex cycle and revival of domestic consumption will be key to Nifty50 companies posting earnings CAGR of nearly 15% over next 2 years. Sectors like Capital Goods, Healthcare, Consumer Durables, Real Estate and Energy are expected to do well going ahead. While pockets of midcap and smallcap segment looks overvalued currently after a sharp rally over last 1 year, there's still value left in certain sections. Investors are suggested to consider taking advantage of any intermediate correction in equity market to increase allocation in stocks with strong growth prospects over medium to long term.
Happy Investing!
