Indian economy to stay as 'star performer' with key indicators in its favour

New Delhi: India continues to be a ‘star performing’ economy as against other emerging markets, as per a report by Axis Securities.

“We firmly believe that India is likely to continue its growth momentum in 2024 and remain the land of stability against the backdrop of a volatile global economy. The majority of the high-frequency indicators are trending upwards and the uptick from the pre-Covid levels is visible, indicating the resilience of the Indian economy," the report said.

On top of it, the macroeconomic scenario has changed in favour of the equity market in the last one month and multiple indicators are now indicating a positive start for 2024.

It is also noteworthy that the US bond yields witnessed a correction of 110bps from its peak in the last one month, which is further supporting the rally. Overall, the country’s macro set-up is positive, the report said.

The fundamentals of Indian corporates have improved significantly and so has the profitability across the board.

This can be seen in the cumulative and rolling net profit of the NSE 500 universe for the last four quarters (till Q2FY24), which crossed the Rs 12 lakh crore mark. Moreover, after a muted performance for several years, the ROE of the broader market is improving as well.

The bolstered balance sheet strength of corporate India and the significantly enhanced health of the Indian banking system are additional positive factors. These elements are poised to facilitate Indian equities in achieving double-digit returns over the next two or three years, supported by robust double-digit earnings growth, it added.

Multiple events are lined up in 2024 and the market will continue to closely monitor the developments around them.

The key events are: 1) Interim Budget; 2) General Elections; 3) Expectation of US Fed rate cut around May-June 2024; 4) Full-year Budget around July 2024 after the formation of new government; 5) Expectations of interest rates cut by the RBI in sync with global rate cuts; 6) US elections in November 2024.

The above-mentioned events are expected to keep the Indian equity market volatile and it could respond in either direction based on the developments, the report said.

Kenneth Andrade, Founder-Director at Old Bridge Capital Management and CIO at Old Bridge Asset Management, said that a global rebalancing of trades works favourably for India, positioning the country to gain global market share across various industries.

Opportunities span a wide spectrum, with a particular focus on the large manufacturing footprint and the resilient services industry, both of which are globally competitive.

“However, as we look ahead to 2024, there are areas of caution. Excesses in the small and microcap space raise concerns, and there is an anticipation of volatility, especially in segments where valuations appear stiff. Despite these short-term challenges, the overarching trend seems to favour India, presenting a higher growth potential relative to peer countries in the region," the report said.

HDFC Securities said in a report that India's GDP growth will remain healthy at 6.8 per cent in FY24 and moderate to 6.3 per cent in FY25.

Domestic manufacturing to lead growth, rural growth to be supported from rural welfare schemes in the Budget and global headwinds will impact export-oriented sectors, it said.