India continues to stand out as a "star performing" economy compared to other emerging markets, according to a report by Axis Securities. The report emphasizes India's growth momentum and stability in the face of a volatile global economy, citing upward trends in high-frequency indicators and resilience demonstrated by the economy post-Covid.
Over the last month, the macroeconomic scenario has shifted in favor of the equity market, with positive indicators suggesting a promising start for 2024. A correction of 110 basis points in US bond yields is also contributing to the positive market sentiment.
The report highlights the improved fundamentals of Indian corporates, with cumulative net profit of the NSE 500 universe crossing Rs 12 lakh crore and an improving Return on Equity (ROE) for the broader market.
The robust balance sheet strength of Indian corporates and the health of the banking system are identified as additional positive factors. The report predicts that these elements will support Indian equities in achieving double-digit returns over the next two or three years, driven by strong double-digit earnings growth.
The year 2024 is expected to be eventful, with key events including the Interim Budget, General Elections, expectations of a US Fed rate cut around May-June 2024, the full-year Budget around July 2024 after the formation of a new government, expectations of interest rate cuts by the RBI, and the US elections in November 2024. These events could introduce volatility to the Indian equity market.
Kenneth Andrade, Founder-Director at Old Bridge Capital Management and CIO at Old Bridge Asset Management, sees a favorable global trade rebalancing benefiting India, positioning the country to gain global market share across various industries. Despite short-term challenges and concerns about excesses in the small and microcap space, the overall trend favors India with higher growth potential relative to peer countries in the region.
HDFC Securities, in a separate report, predicts healthy GDP growth for India at 6.8% in FY24, moderating to 6.3% in FY25. The report anticipates domestic manufacturing leading growth, supported by rural welfare schemes in the Budget, while export-oriented sectors may face challenges from global headwinds.
(With Agency Inputs)
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