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Market Watch

Market Watch

Equity Market Overview –Dec 2024






Domestic Equity Market Update

  • Indian equities ended the month on a mixed note. Large cap-oriented BSE Sensex ended lower by 2.08% (MoM) and Nifty 50 ended lower by 2.02% (MoM). While the BSE Midcap index ended higher by 0.81%(MoM), BSE Small cap index ended lower by 0.03% (MoM).
  •  In terms of BSE sectoral indices, most of the sectors ended on a mixed note. Healthcare, Realty and Consumer Durables outperformed the most whereas Power and Metal were the laggards during the month.
  • During the month, FPIs were net buyers in equities to the tune of Rs 182 bn. (Data as on 30th December). 

  • Domestic equity markets ended the week on a mixed note on back of positive global cues and subdued US inflation data. However, gains were restricted on concerns over persistent selling by the foreign institutional investors in domestic equity markets along with rupee's fall to record levels against the US dollar. US Federal Reserve’s hawkish tone on interest rate cuts in 2025 also dampened the market sentiment.


Global Market Updates

  • US equites ended the month on negative note as the US Federal Reserve made its anticipated announcement regarding a reduction in interest rates by a quarter point on 18th December, 2024; however, it has projected a lower number of rate cuts for the upcoming year than previously estimated. Also, producer prices in the US rose more than anticipated in November 2024 which led to volatility in the equity markets.
  • European equity markets ended on a mixed note due to political uncertainty in France, and lingering concerns about geopolitical tensions and as investors were analysing the European Central Bank's choice to reduce interest rates by 25 basis points and were considering the likelihood of an additional reduction in the first quarter of 2025. Investors’ concern over slowing economic growth and a potential trade war also aided downside in the equity markets.
  • Brent crude price rallied from USD 72.9 per barrel to USD 74.6 per barrel following the ongoing conflict between Russia and Ukraine, and expectations of increased demand from China followed by the recent stimulus measures. Furthermore, prices increased on possible sanctions on Russia by the European Union.


Most of the Domestic Macro data points showed a strong picture

  • According to S&P Global Ratings, India’s GDP is set to grow at 6.8% YoY in FY25 on the back of strong urban consumption, steady services sector growth, and ongoing investment in infrastructure. For FY26 and FY27, the previous GDP growth estimates were pegged downwards by 20 bps at 6.7% YoY and 6.8% YoY, respectively.
  • The Asian Development Bank (ADB) has lowered its India growth forecast for FY25 to 6.5% YoY from its earlier estimates of 7% YoY. ADB also revised its growth forecast for FY26 to 7% YoY from 7.2% YoY earlier, citing India’s slower than expected growth in private capex and housing demand.
  • According to India Ratings and Research, India’s economy is expected to grow at 6.6% YoY in FY26, compared with the downward revised projection of 6.4% YoY for FY25.
  • RBI’s MPC decided to keep the policy repo rate unchanged, at 6.5%, and maintained a “neutral” stance. However, it reduced the CRR by 50 bps to 4% to boost liquidity in the system.
  • According to RBI data, credit growth slowed to 10.64% YoY in the fortnight ending November 29, 2024, growing almost in tandem with deposits, which posted a growth of 10.72% YoY during the same period.
  • According to official data, the output of eight key infrastructure sectors slowed down to 4.3% YoY in November 2024 against 7.9% YoY growth registered a year ago.
  • Government data showed that India's fiscal deficit for April-November 2024 was Rs 8.47 trillion (USD 98.90 bn), or 52.5% of the estimate for the FY25. Net tax receipts for the first eight months of FY25 were at 14.43 trillion rupees, or 56% of the annual target, compared with Rs 14.36 trillion for the same period last year.
  • As per Govt data, the Centre’s capital expenditure grew 21% YoY in November 2024 after a weak trajectory between April and October 2024.
  • The current account deficit (CAD), the difference between total imports and exports, reached $11.2 billion or 1.2% of GDP in July-September quarter of this year, compared with a revised deficit of $11.3 billion or 1.3% of GDP in the same quarter a year ago, the Reserve Bank of India (RBI) said in a release.
  • As per Government data, India's finished steel imports from China rose 22.8% YoY and reached 1.96 mn metric tonnes, an all-time high, during April-November 2024.
  • As per data from the Ministry of Commerce and Industry, electronics exports from India have reached USD 22.5 bn in value during the period April-November 2024.
  • As per the Central Electricity Authority, India added almost 4 gigawatts of coal-fired capacity in 2024, about the same as in 2023.
  • According to Micro Finance Industry Network (MFIN), NBFCs clocked the highest growth rate in the micro-finance business at 27.6% YoY as of Q2 FY25 followed by banks at 10.6% YoY. The growth for NBFCs-MFI, which are dedicated to the business, came in at 9.2% YoY while that of small finance declined by 5.6% YoY.
  • According to data by Prime Database, fundraising through Qualified Institutional Placements (QIPs) reached an all-time high in 2024, surpassing the Rs 1 trillion mark for the first time ever in a calendar year as Indian companies raised Rs 1.21 trillion through QIPs till November 2024.
  • As per data from the Apparel Exports Promotion Council (AEPC), India's readymade garment exports rose 11.4% YoY to USD 9.85 bn during April-November of FY25 despite global uncertainties.
  • According to Union New & Renewable Energy Minister, Pralhad Joshi, India added almost 15 GW of renewable energy capacity between April-November of FY25, nearly double the 7.54 GW added during April-November of FY24.
  • According to the Railway Ministry data, freight loading on Indian Railways continued to show sluggish growth in November 2024, with the national transporter handling 130 mn tonnes (mt) of goods, marking a 1.36% YoY increase. Coal, which makes up half of the railway’s freight volume, saw a 3.4% YoY growth, reaching 65.5 mt.
  • According to Union Minister Jitendra Singh, India's atomic power capacity has almost doubled in the past decade from 4,780 megawatts in 2014 to 8,081 megawatts in 2024.
  • As per Government data, Gross GST revenue grew 8.5% YoY to over Rs 1.82 trillion in November 2024 as compared to Rs 1.68 trillion in November 2023.
  • According to CGA data, Central Government’s capex contracted 8.4% YoY in October 2024 while revenue expenditure, excluding interest payments, rose 41.9% YoY.
  • As per the data by the Ministry of Commerce and Industry, growth in the output of eight key infrastructure industries, known as the core sector, further recovered to 3.1% YoY in October.
  • As per Government data, India's power consumption rose 5.14% YoY to 125.44 bn units (BU) in November 2024.
  • According to data from the Ministry of Finance, transactions processed through UPI on RuPay credit cards doubled during April-October of FY25, amounting to Rs 638.26 bn being processed.
  • According to CRISIL Ratings, the Assets Under Management (AUM) of infrastructure investment trusts (InvITs) in the road sector are poised to surge by 68% to Rs 3.2 trillion by March 2026.
  • As per data from CRISIL Research, the Indian pharmaceutical sector is projected to expand 8-10% YoY in this FY25, after growing by 10% YoY in FY24 and is expected to grow by another 9-11% in FY26.
  • According to CRISIL ratings, India's data centre capacity is set to more than double to 2-2.3 GW by FY27, led by increasing digitalization, and access to mobile data traffic.
  • According to CRISIL ratings, branded hotels in India are likely to see double-digit revenue growth of 13-14% in FY25, and 11-12% in FY26, on the back of a surge in demand.
  • According to CARE Ratings, the money raised by NBFCs from Mutual Funds (MF) rose by almost 47 % YoY to Rs 2.33 trillion in October 2024.
  • According to ICRA, the Indian IT service sector will log growth in the range of 4-6% YoY in FY25, slightly better than the low-single digit growth of 3.8% YoY for FY24.
  • As per the Kantar FMCG Pulse report, India’s FMCG sector reported growth of just 4.3% YoY in the August-October (ASO) quarter of FY25, compared to 6.4% YoY growth in the ASO quarter of FY24.
  • According to S&P Global, the HSBC final India Manufacturing Purchasing Managers' Index’s (PMI) slipped to a 11-month low of 56.5 in November from 57.5 in October 2024.
  • As per S&P Global data, the HSBC India Services PMI figure was 58.4 in November 2024, almost unchanged from 58.5 in October but lower than a preliminary estimate of 59.2.
  • As per data from S&P Global, HSBC's Flash India Composite Purchasing Managers' Index (PMI) rose to 60.7 in December 2024, matching August 2024’s reading, after dropping to 58.6 in November 2024.
  • As per the Naukri JobSpeak Index, white-collar hiring activity reported a modest 2% YoY growth in November 2024.
  • As per AMFI data, Equity mutual funds witnessed an inflow of Rs 359.43 bn in November 2024 down from Rs 418.87 bn in October 2024, marking a drop of 14% MoM. November 2024 marked the 45th consecutive month of net inflows into equity-oriented funds. The mutual fund industry’s Net AUM rose to Rs 68.08 trillion in November 2024 from Rs 67.25 trillion in October 2024.


Outlook & Investment Strategy

  • Going forward, Indian equity market is likely to be driven by incoming macro data points, upcoming union budget, FPI/DII flows, monetary policy moves from the RBI, Q3FY25 results and announcement of policy changes by the Incoming US Administration. Despite the 50 bps cut by the RBI to infuse durable liquidity in the system, the system liquidity continued to remain in deficit, resulting in weaker credit growth. Improvement in the liquidity condition remains a key to improved growth conditions in the economy.
  • In US, Market participants are keenly awaiting the policy that Trump pursues to drive growth in the US. It is expected to be positive for corporations and the US economy, although there are some concerns about the effect planned tariff increases will have its trading partners including India.
  • In India, earnings momentum in the economy saw deceleration along with weak GDP growth. Even the high frequency data points in India are suggesting a gradual deceleration of momentum. Data like the Tax collection, Government spending, Exchange rate etc are showing incremental moderation. However, the PMI data continues to reflect strength in the economy. The emerging issue in India seems to be the weakening urban demand and muted Government capex spend.
  • While the inflow into the equity markets have been substantial from the domestic investors, FPI outflows have remain a cause of concern. Rising dollar index seems to be one of the reasons for such outflows. As the rally in the Dollar index subsides, the FPI outflows are expected to subside. Also, the supply of fresh equity in the form of FPO, IPO and dilution by the promoters have also been substantial liquidity guzzlers. In terms of valuations, Midcap indices continue to enjoy higher multiples compared to Smallcap indices, which in turn have higher multiple compared to Largecap indices.
  • The market participants expect that the government spending is likely to be quite strong in the last quarter of the fiscal year and that could see improvement across economic parameters as we move forward. This along with a strong marriage season could support corporate earnings in Q3 and Q4 FY25. However, the market may not take further earnings disappointments lightly and could see sharper correction (especially in small and midcap category) if such scenario pans out.
  • In the long term, improving domestic macro conditions, favourable demographics, rising per capital income and Strong consumption demand could keep driving the Indian corporate earnings higher and support the equity markets, thus making Indian markets a “buy on dips” play currently.
  • Fresh Investment deployment strategy could be 50% lumpsum and rest 50% to be staggered over the next 5-6 months. Mutual Fund investors can look to focus on categories like Diversified equity, Equity Hybrid and Multi-asset funds. Aggressive investors may also look at Business Cycle Funds for allocation. All allocations should be done in line with the risk profile and product suitability of the investor.





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Debt market overview for the month of Dec 2024 



Domestic banking system liquidity remained in surplus during the month. Banking system liquidity as measured by the Reserve Bank of India’s (RBI) net Liquidity Adjustment Facility (LAF) stood at a daily average surplus of ~Rs 684.7 bn in December 2024 as against a daily average deficit of ~Rs 1.39 trillion in the previous month. The call money market traded in the range of ~5.75-7.15% during the month.


Domestic G-secs yields closed higher in December 2024, and the 10-year benchmark, 6.79% G-Sec 2034 bond, ended at 6.76%, compared to the previous month’s close of 6.74%. Indian G-sec yields initially fell after the minutes of the RBI's latest meeting indicated a possibility of a rate cut in February 2025. However, gains were offset tracking a sharp fall in the domestic currency w.r.t. the USD that weighed on overall investor appetite. Indian G-sec yields rose following a spike in US Treasury yields. Losses were extended after the US Federal Reserve reduced the interest rate by 25 bps in its December 2024 policy meeting, and flagged a slower pace of policy easing in 2025, pointing to stable labor market and sticky inflation.

Inflation in the US and Europe continues to trend downward, but remains above the central banks’ target of 2%. Inflation based on the Consumer Price Index (CPI) in the US increased to 2.7% YoY in November 2024 from 2.6% YoY in October 2024 and market expectations of 2.7% YoY. The US core CPI remained flat at 3.3% YoY in November 2024 as compared to 3.3% YoY in October 2024. The US Federal Reserve lowered interest rates by 25 bps, in support of its dual goals of maximum employment and inflation at the rate of 2% over the longer run. Fed decided to lower the target range for the Federal Funds Rate by 25 basis points to 4.25-4.50%. The US GDP growth was unrevised at 3.1% YoY in the Q3 CY24, faster than to the 3.0% YoY jump in Q2 CY24. The US trade deficit narrowed to USD 73.8 bn in November 2024 from a revised USD 83.8 bn in October 2024 and against the market expectations of USD 75.0 bn. In the Eurozone, the CPI rose 2.2% YoY in November 2024, higher than 2.0% YoY increase in October 2024. The European Central Bank (ECB) lowered the deposit facility rate, which is the new policy rate, by 25 bps to 3.00%. The Bank of England (BoE) cut the Bank Rate by 25 bps to 4.75%, in line with expectations. According to China’s National Bureau of Statistics, China’s CPI inflation rose by 0.2% YoY in November 2024 vs. 0.3% YoY in October2024, and lower than market expectations of 0.5% YoY. The People's Bank of China maintained its one-year Loan Prime Rate (LPR) at 3.10%. Similarly, the five-year LPR, the benchmark for mortgage rates, was retained at 3.60%. The bank had cut its both LPRs by 25 basis points each in October 2024 and has kept its rates unchanged since then. The Bank of Japan (BoJ) maintained its uncollateralized overnight call rate at around 0.25% after two hikes in CY24 and signaled that the policy normalization will continue but the further action will be data dependent.

Domestically, India’s CPI-based inflation for November 2024 inched up to 5.48% YoY, lower than the 6.21% YoY print for October 2024 and below the market expectations of 5.53% YoY. CPI inflation came in lower on the back of base effect and lower prices of Food and Vegetables. Core CPI inflation fell to 3.64% YoY in November 2024 as against 3.70% YoY in October 2024. Wholesale Price Index (WPI) based inflation rose 1.89% YoY in November 2024, slower than the 2.36% YoY increase in October 2024. Net Direct Tax collections grew 16.45% YoY to Rs 15.82 trillion between April 1 and December 17 of FY25. Of this, non-corporate tax grew 22.5% YoY to Rs 7.97 trillion and Corporate tax collection grew at a slower pace of 8.6% YoY to Rs 7.4 trillion. India’s Current Account Deficit (CAD) marginally narrowed to USD 11.2 bn or 1.2% of GDP during Q2 FY25 from USD 11.3 bn or 1.3% of GDP during Q2 FY24. India's merchandise trade deficit widened to USD 37.84 bn in November 2024 compared with USD 27.1 bn in October 2024. India's fiscal deficit for April-November of FY25 stood at Rs 8.5 trillion, or 52.2% of annual estimates, narrower than the 50.7% of annual estimates reported for the comparable period in FY24. Advance direct tax receipts rose by 16.8% YoY in Q3 FY25, reflecting some moderation in tax payments. However, the pace of collections still exceeded the Budget estimates of gross (pre-devolution) direct tax receipts growth, which is 12.4% YoY. The gross Goods and Services Tax (GST) collections stood at Rs 1.77 trillion in December 2024, showing a growth of 7.3% YoY compared to the Rs 1.65 trillion collected in December 2023.

The liquidity continued to remain in deficit owing the to advance tax and GST payouts and RBI forex management. It is expected to improve as the effect of the CRR cuts fully flows into the system and with a rise in government spending in January 2025. However, the market participants still expect the RBI to inject further durable liquidity in the system in due course. The CPI inflation for November 2024 eased slightly to 5.48% YoY, below market expectations of 5.53% YoY. While the CPI inflation remains above the RBI’s target of 4% YoY, the food inflation is expected to cool down further during the winter months, which can cause headline inflation to gradually trend downwards and could give room to the MPC for policy rate cuts. Issues on the external front, in terms of rising trade deficit and weakening currency, remain a key challenge for the RBI to negotiate with in the medium term and can have implication on the timing of the policy rate cuts. In the US, the Federal Reserve is guiding to slowing the pace of policy rate cuts in the light of improving growth and employment data. While inflation trajectory in the US remains on a downward path and Manufacturing continues to remain weak, the policy measures announced by the incoming Trump Administration would be a key factor that would drive the policy rates there.

Fixed Income Mutual Fund investment strategy:- Domestically, tactical opportunity has again emerged for duration strategy, due to the recent uptick in the yields. With the growth decelerating, inflation moderating and expectation of policy rate cuts on the rise, only the timing of the same seems to have been pushed forward. Additionally, as liquidity conditions ease further due to the change in stance, it is likely to compress the corporate bond yields at the shorter end in the medium term. With this backdrop, the inverted corporate bond yield curve may normalize, making the case for corporate bonds at the 1-4-years segment of the curve. Hence, investors can look at Corporate Bond Funds for a horizon of 15 months and above. For a horizon of 24 months and above, investors can look at Dynamic Bond Funds. For a horizon of 3 months and above, investors can consider Arbitrage Funds or Money Market Funds. Whereas for a horizon of up to 3 months, investors can consider Overnight Funds and Liquid Funds. Investors can also look at Multi-asset allocation funds for a horizon of 36 months and above. Investors should invest in line with their risk profile and product suitability.

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