India’s stock markets have displayed remarkable resilience despite global concerns about an economic slowdown and sluggish growth predictions worldwide for 2024
The benchmark BSE Sensex index aims to reach 70,000 by mid-2024 and potentially soaring to 72,500 by the year’s end
While India’s stock market trails only the US in its price-to-earnings ratio, its recent remarkable performance positions it as a top contender
India’s stock market now surpasses the combined size of Korea and Taiwan, with trading volumes exceeding those of Hong Kong. Moreover, it saw more IPOs than the US in 2023
By Dr Maheep
A new report from credit rating agency Fitch Ratings forecasts a promising outlook for Indian businesses. Entitled ‘India Corporates: Sector Trends 2024,’ the report notes that India’s robust economic growth, projected to reach 6.5% in the current fiscal year, is driving domestic demand and counteracting slowdowns in international markets.
This robust demand, coupled with easing input costs, is expected to bolster corporate profits in the coming year. Sectors such as cement, electricity, and petroleum are likely to experience particularly strong growth. Furthermore, the improvement in infrastructure is set to drive steel demand, while the travel and tourism sectors are also witnessing an upswing.
Even the IT sector, which is facing headwinds from slowing US and European economies, is expected to benefit from easing employee turnover and wage pressures. Overall, Fitch paints a positive picture for Indian corporates, thanks to the country’s resilient economic growth and improving domestic markets.
India’s stock markets show remarkable resilience
India’s stock markets have displayed remarkable resilience despite global concerns about an economic slowdown and sluggish growth predictions worldwide for 2024. Experts anticipate a substantial rise, with forecasts suggesting a 10% gain by year-end. This optimism is driven by the market’s impressive performance in 2023, which saw an increase of nearly 8%, even amidst global challenges.
The benchmark BSE Sensex index has recently reached an all-time high and is anticipated to maintain its upward trajectory, aiming to reach 70,000 by mid-2024 and potentially soaring to 72,500 by the year’s end.
Further fueling the market’s momentum were impressive performances by sectoral indices, with the Nifty Smallcap 100 and Nifty Midcap 100 soaring by 54% and 44%, respectively. Notably, the Nifty 50 index even reached a historic high of 19,425 on November 10, 2023, solidifying the Indian stock market’s strong performance in 2023.
This bullish outlook is shared by an overwhelming 90% of analysts interviewed by news agency Reuters, strengthening the hope that India’s stock market is poised for an impressive surge in the near future.
The market hit an all-time high in September 2023, recording its longest winning streak in 16 years. Nearly 90% of analysts predict that the Sensex will reach new highs within six months, with a potential rise of over 10% by year-end.
India’s robust economic growth forecasted for 2024
India’s strong economic growth, expected to continue in 2024, is a key driver for this optimism. Additionally, a large and growing population of young investors, increasingly active in the market, is seen as another contributing factor.
While some moderation in growth is anticipated, India is likely to remain a well-favored market, supported by both domestic and international investors. The South Asian nation’s economy is currently experiencing the fastest growth among major countries. This strong performance, expected to continue at over 6% for the next couple of years, is directly contributing to the success of the Indian stock market.
A unique force behind this surge is the rise of young Indian investors. Their increasing financial literacy and easier access to financial services have led to a remarkable increase in mutual fund accounts, jumping from 60 million in 2016 to a staggering 150 million today. This year, Indian companies witnessed impressive earnings growth exceeding 20%, further fueling optimism.
Analysts foresee continued growth for the Indian stock market. Notable financial experts such as Rajat Agarwal from Societe Generale affirm that India’s resilient economic performance and robust fundamentals position it as a highly attractive market.
There is anticipation in the market that value stocks are expected to outshine growth stocks in the next six months, driven by expected increases in interest rates. Experts like Nishit Master, a portfolio manager at Axis Securities, point out that historically, value stocks perform better when interest rates rise.
While India’s stock market may not be considered cheap in comparison to others, trailing only behind the US in terms of its price-to-earnings ratio, its recent remarkable performance positions it as a top contender.
Despite potentially high valuations, analysts remain overwhelmingly optimistic, with nearly 90% predicting record highs for the market in the coming months.
This strength stems from two key factors: robust domestic growth and confidence in India’s future. Firstly, the Indian economy is experiencing strong internal growth, which serves as a buffer against external headwinds. This has attracted foreign investors (FPIs) who are drawn to the country’s promising gross domestic product (GDP) outlook.
Secondly, the recent favorable results in state elections suggest continued political stability, another crucial element for sustained economic progress. This stability further bolsters investor confidence and strengthens India’s long-term growth prospects.
Enthusiastic investor base
With a confident hand on the financial tiller, India’s economy shows resilience, boosted by its young and enthusiastic investor base. This, combined with a strategic shift towards stable value stocks, shines a hopeful light on the Indian market, making it stand out and potentially surpass global trends.
With China’s growth slowing down, India stands out as a prime candidate for explosive economic expansion. This may very well position it as the best growth opportunity not just in emerging markets, but globally.
Investors seeking alternatives are turning to India, where GDP is projected to surge over 6% for years to come. This optimistic outlook is backed up by several factors.
First and foremost, India stands out with its distinction of having the world’s largest overall and youthful population, presenting a substantial demographic dividend. Secondly, the democratically elected government and its market-friendly policies create a stable and attractive environment for investment. This combination sets the stage for outstanding stock selection and potentially superior returns for investors looking to capitalize on India’s exciting growth potential.
Historically, India’s stock market has provided good returns with lower risk compared to other major markets. Additionally, it has witnessed seven consecutive
years of gains.
India’s stock market now surpasses the combined size of Korea and Taiwan, with trading volumes exceeding those of Hong Kong. Moreover, it saw more initial public offerings (IPOs) than the US in 2023.
India’s inclusion in a major bond index will attract more investors, lowering borrowing costs for the government and businesses, thereby supporting economic growth. The country boasts the world’s largest young population, which is well-educated and ready to contribute to the economy across various sectors.
India’s consumer spending set to surge
With soaring income levels, India’s consumer spending is poised for a major surge, benefiting consumer-focused firms. Recent election wins and positive economic performance suggest Prime Minister Narendra Modi’s re-election is likely, bringing political and economic continuity. His policies could further boost the economy.
The Indian market’s connection to international market fluctuations has weakened, making it less susceptible to external risks. As an oil importer, lower oil prices would benefit the country’s current account and inflation, further supporting economic growth.
India is actively pursuing measures to position itself as an appealing investment destination. Through responsible financial management, the country has successfully achieved declining inflation rates, maintained a stable currency, and made major strides in improving deficits, showcasing its commitment to fostering a conducive environment for investment.
Furthermore, the government is actively implementing reforms to modernize the economy. These encompass the UPI (digital payment system), Aadhaar (National Identification System), and GST (Harmonized Sales Tax), all of which confer benefits to both businesses and consumers.
“Make in India” initiative
Furthermore, policies such as lower corporate taxes, production incentives, and the “Make in India” initiative make it easier and more enticing to conduct business in the country.
In addition to these internal improvements, India presents several advantages as an alternative to China. With robust GDP growth projections, it is poised to narrow the income gap with China over time.
Moreover, India’s young and educated population is a significant asset compared to China’s aging demographic. The country’s role as a “China+1” destination for companies seeking to diversify their manufacturing base is strengthened by lower labor costs, government incentives, and burgeoning manufacturing hubs. Lastly, India’s robust democratic structure provides additional security and transparency for investors.
Dr Maheep is an expert in International Relations and Global Politics, boasting over a decade of experience in both teaching and conducting research in these fields