The Month that was: May 2024

In May, the Nifty Index ended flat amid increased volatility due to Lok Sabha elections 2024, geopolitical tensions, and significant FPI outflows. Sectoral indices closed mixed, with Capital goods, Power, and Metals as major gainers, while IT, healthcare, and oil & gas were the major losers.

On the global front, markets ended on a mixed note, with Taiwan (+3.8%), US S&P 500 (+3.4%), and Germany (+3.2%) as major gainers, while Russia (-5%), the Philippines (-4%), and Indonesia (-3.6%) declined the most. Key developments included S&P Global Ratings revising its outlook for the Indian economy to ‘positive’ from ‘stable’, RBI approving the transfer of Rs2.1 tn as surplus to the central government for FY2024 and US Fed maintaining status quo on the federal funds rate.

FPIs sold US$3.8 bn of Indian equities in the secondary market, whereas DIIs bought US$6.4 bn. On the economy front, CPI inflation in April was unchanged from March at 4.83%, WPI inflation in April increased to 1.3%, and India’s industrial production growth in March moderated to 4.9% from 5.6% in February. 4QFY24 real GDP growth surprised on the upside at 7.8%.

Market Outlook 

The outlook for Indian markets remains positive, driven by strong domestic macro economic parameters, robust earnings growth expectations and supportive global liquidity going ahead as interest rate hike cycle reverses during second half of 2024. While results of General Election suprised negatively with coalition government taking charge, policy continuity is likely to be seen. Upcoming Union Budget in July will underscore some of the Government's reform agenda which will be the key monitorable for the markets.

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, Banks, Consumer Staples & Durables, Real Estate and Energy are expected to do well going ahead. 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!