India added $900 Bn in market cap in 2023, equivalent to the entire market cap of countries such as Brazil, Sweden & Netherlands. Expectations are for interest rates to fall in 2024, with the Fed potentially providing hints during upcoming policy meetings based on their evaluation of inflation and economic data
Deena Mehta
FinTech BizNews Service
Mumbai, January 1, 2024: 2024 is bringing in new opportunities. Know the insights
about how 2023 has been for capital market and Indian economy from the lens of an
investment banker, fund manager, venture capitalist and investment Intermediates.
Also, sharing a quick gist of the report collated and analysed by Pantomath
Group that delves into Global Economy Updates and Outlook, Indian Economy
Outlook, Key Economic Indicators, Key Sectors that will grow in 2024, Key Policy
Reforms and the IPO market Update.
Global Economy Updates and Outlook: After sharp correction in global equity
markets in CY2022, CY2023 proved positive for global equity markets, with the US
market leading the charge. We witnessed sharp recovery in USA equity markets in
second half before final finish of CY2023. Despite ongoing geopolitical tensions and
economic uncertainties, investors remained optimistic, driving stock prices upward.
One notable development in 2023 was the significant rise in US 10-year G-Sec Bond
yields. These yields climbed to their highest levels in over 15 years, reaching
approximately 5%. This increase reflected the market anticipation of higher interest
rates in the future, driven by the Federal Reserve efforts to combat inflation. 2023
was a year marked by the highest inflation and sharpest monetary policy tightening
in four decades, led by global Central Bankers especially the FED, ECB, and BOE.
The CPI is constantly moderating from peak of 6.4% in January 2023. It came
around 3.10% for the month of November 2023, very close to FED target range of
2%. Softening of Commodity prices were also key to moderate manufacturing
inflation & raw material costs in general for this year. The FED Policy rate remained
unchanged since June 2023. It reached around 5.25 to 5.50 range. The situation
has now reached pivotal levels, suggesting a potential pause in the policy rate hike
cycle.
The US economy demonstrated resilience as wealth effects and full employment
drove consumer spending. The Non-farm payroll data is suggesting Monthly Average
of addition of around 263000 jobs since January 2023 in last 11 months. US
personnel spending is showing pick up in second half & positive trend indicating
resilience of economy. Unemployment levels is at 5 years low of around 3.7%.
Market is optimistic because FED has done their job to control Inflation by hiking
interest rates without so far hurting the overall economy. The cut in interest in
CY2024 will further lead to overall growth of the economy, such optimism is reflecting
in recent recovery of the equity market. The USA GDP growth data showing sharp
uptick in Q3 CY 2023. It showing annualised growth rate of around 4.90% in Q3,
indicating resilience in US economy. Weak Chinese growth, resulting from a real
estate and consumer confidence crisis, led to a softening of commodity prices.
Geopolitical turmoil persisted with humanitarian disasters in Ukraine and the Middle
East, posing potential uncertain risks for the overall GDP growth of the world
economy. The S&P 500 US MFG PMI remained below 50, indicating a slowdown in
manufacturing & new order inflow. OPEC+ Members continued its supply cut to
maintain price stability in crude Oil Prices amid weakening global oil demand
environment especially from China. Additionally, both Russia & Saudi Arabia to
extend its voluntarily production cut to maintain crude oil price stability.
Ms. Deena Mehta, Group Managing Director, ACMIIL, Asit C Mehta Financial
Services Limited, informs: “The slowdown in demand, aggravated by a still high but
gradually declining inflation rate in Western countries, contributed to a reversal of the
balance between supply and demand. The global container freight rates sharply
decline in CY2023. Although the collapse in demand played a determining role in the
fall of container freight rates, the situation was aggravated by overcapacity, as the
shipping companies gradually took delivery of the ships they had ordered during the
period of prosperity from which they benefited in 2021-2022.
Ms. Madhu Lunawat, Executive Director & CIO, India Inflection Opportunity
Fund, believes: “Moving into 2024, Global Economic slowdown worry due to high
Interest rates for prolonged period of time will continue to be headwind for the world
economy. Expectations are for interest rates to fall in 2024, with the Fed potentially
providing hints during upcoming policy meetings based on their evaluation of inflation
and economic data. A combination of solid activity and falling inflation has seen the
market narrative increasingly shift towards the prospects of a soft landing.”
Indian Economy Update and Outlook: In 2023, the Indian equity market witnessed
a phenomenal performance, as benchmark indices soared to unprecedented highs,
with the Nifty and Sensex scaled milestones of 21,000 and 70,000 mark,
respectively. Indian equity emerged as one of the best-performing markets in last two
years. Indian market fell relatively much lesser in CY 2022 compared to other global
Markets. On the other hand, broader indices outperformed, the NSE Midcap 100
and NSE Small-cap 250 advanced 40.9% and 42%, respectively in CY
2023. India market cap is up 26% in the current calendar year to $4.2 Tn. India
added $900 Bn in market cap in 2023, equivalent to the entire market cap of
countries such as Brazil, Sweden & Netherlands.
RBI adopted a balanced approach concerning inflation and growth in its policy
decisions, maintaining a pause in the policy rate since February in CY2023.
Furthermore, mutual fund data suggests a consistent inflow from Indian retail
investors into equity markets, with record-high levels of Systematic Investment Plan
(SIP) inflow observed in Cy2023.
Mahavir Lunawat, Managing Director Pantomath Capital Advisors Private
Limited, explains: “The Indian corporate earnings began showing improvement, with
companies benefiting from a softening in commodity prices, leading to enhanced
profitability and margins. Companies are expected to continue strong performance in
the upcoming quarters, driven by a robust domestic demand environment, positive
macroeconomic factors and private capex revival. Visible revival in private capex
along with sustained pick up in govt capex bodes well. A record capex of Rs 26 lakh
crore vis-à- vis Rs 10-12 lakh cr four years back will continue to foster momentum.”
Devang Shah, Head Retail Research, ACMIIL
“The year witnessed robust Industrial Production (IIP) growth and favourable PMI
data, indicating an expansion in output at an above-trend pace. The manufacturing
sector sustained its growth momentum, driven by a consistent inflow of new orders.
Many companies experienced a notable uptick in sales during the festival season.
While the Consumer Price Index (CPI) started to moderate from its peak levels, it
remained above the Reserve Bank of India's comfort range of 2% to 4%. Concerns
about inflation persist, particularly in relation to the risk of an increase in food
inflation, according to the RBI. The government aims to address supply issues
proactively to prevent any sharp spikes in food and vegetable prices.”
Moving Ahead, Indian Economy Outlook for 2024
“The public capex push by the government is ultimately now achieving its aim of
beginning the private capex revival of Indian companies. The balance sheet of Indian
companies also shows less or moderate leverage. The proactive policies of the RBI
are beneficial for banks for any kind of un-expected domestic and global financial
risk. Banks are also at comfortable levels, with constantly falling NPA levels and a
pick-up in credit growth. The companies are also in a sound position to boost
investments”, states Mr. Mahavir Lunawat
These factors are also indicating medium- to long-term GDP growth in the country.
As per S&P global Ratings, India is set to become the third-largest economy by
2030, and the paramount test for the country would be to become the next global
manufacturing hub. The country’s robust economic trajectory is underpinned by
resilient growth and favourable demographics. After all, India is the most populous
country in the world and where the median age is 28.2 years. Recovery in domestic
demand, particularly in private consumption and household spending, after a
prolonged pandemic, should facilitate business expansion plans. Feeding into this is
India’s large consumer base, rising urban incomes, and the aspirations of the world’s
largest young population.
“Key industries beckoning foreign investors in India in 2024 include healthcare and
insurance, fintech, renewable energy and climate tech, electric vehicles and
automobiles, IT and services, real estate and infrastructure, fast-moving consumer
goods (FMCG), and R& D, tech innovation, and artificial intelligence (AI). These have
all been on a hot streak in 2023, as foreign direct investment (FDI) policies have
relaxed in recent years, and production-linked incentive (PLI) schemes have
promoted, listing down a select industry” remarks Mr. Devang Shah.
India’s digital economy will continue to attract investors as technology-based
solutions are sought to transform people’s lives, governance, and enterprise
operations. The rapid growth in demand for online products and services is also a
reflection of the increasing spending power of India’s non-metropolitan (tier-2 and
tier-3) cities. The digital economy accounted for 4-4.5 percent of the total GDP in
2014 and is currently at 11 percent. The government projects the digital economy to
make up more than 20 percent of Indian GDP by 2026.
“Emerging industries poised for investment-led growth in 2024 are battery energy
storage solutions, green hydrogen, biotechnology, AVGC (animation, visual effects,
gaming, comics), and semiconductor chip manufacturing, assembly, and design.
Foreign companies looking at the Indian market are at an advantage as state
governments are flexible and offer competitive sops to attract cutting-edge
technology and generate large scale employment”. Added Ms. Deena Mehta.
Increasing India’s participation in global value chains is a top target for both
government and domestic market stakeholders. It’s what has contributed to various
policymaking efforts to improve the business environment and streamline
compliance on one hand, as well as cultivate local competencies in niche sectors on
the other. So far, export performance of the mobile industry is a first step in the
direction of deeper supply chain engagement. Furthermore, India has intensified its
decarbonization initiatives amid shifts towards renewable energy, and aims to
achieve 500 GW renewables capacity by 2030. In the corporate sector, sustainability
and ESG is on the radar of top organizations and manufacturing enterprises as
green tech skills will influence hiring decisions to key roles in 2024. According to an
industry report by TeamLease Digital, India’s green industry is expected to add 3.7
million jobs by FY 2024-25 to the current 18.5 million. The top sought skills are in
renewable energy, environmental health safety, solar energy, corporate social
responsibility, and sustainability.
“Sustainability entails a commitment to diminish the carbon footprint across
enterprise operations, including buildings, production and service processes,
transportation, waste treatment, etc. India will be seeking greater global collaboration
in the realm of technology, resource management, and green skilling to grow its
domestic expertise in these critical areas. Bridging knowledge gaps, however, will
not be limited to manufacturing and corporate sectors as farming and agriculture
which serve as India’s economic backbone also require long-term investment in
sustainability skills, green tech, and data application”. Emphasizes Ms.
Madhu Lunawat, CIO of impact investing Fund, India Inflection
Opportunity Fund.
Moving to the outlook for the real estate sector in India, 2024 is anticipated to be
positive across the residential, office, and warehousing segments. According to
industry analyst Knight Frank’s New Horizon Outlook 2024 report, Mumbai is poised
for a 5.5 percent increase in prime residential prices during the year, attributed to
robust demand and a thriving economic environment. The warehousing market is
expected to benefit from the decentralization of supply chains and the government’s
emphasis on manufacturing. In the office space, India, alongside China, is projected
to lead Grade-A office supply in the Asia-Pacific (APAC) region in 2024. Collectively,
these two countries are set to constitute nearly two-thirds of the anticipated 10 Mn
sqm (108 Mn sq.ft.) of office supply. Finally, sector opportunities across the
infrastructure domain will be attractive as the federal and state governments
implement long-term blueprints to bolster regional air/road/railway connectivity.
Improve energy supplies, achieve renewable targets, and upgrade transportation
networks. Per the latest available data covering the first seven months of FY24
(April-October 2023), infrastructure output in India rose 8.6 percent year-on-year.
The looming general elections, expected to be scheduled between April-May 2024,
will influence the economic objectives of the central government, led by Prime
Minister Narendra Modi’s BJP Party. These elections will influence federal spending
plans and announcements pertaining to job creation and infrastructure development.
IPO Commentary
Indian Market Update:
“India ending calendar year 2023 with Optimism in spite being global uncertainties. Festival Cheers with strong demand environment is going to continue further, giving hope for strong 2024 as well. Leading credit rating firm Fitch said last week that with strong domestic demand growth, it is expected that India will be among the world's fastest-growing countries, with resilient GDP growth of 6.5 per cent during the fiscal 2024-25, feels Mahavir Lunawat, Managing Director, Pantomath Capital Advisors Pvt. Ltd. Rising demand and easing input cost pressure should boost margins of the corporates in the next financial year. India’s total market cap reached at $4.3 trillion with main indices trading at their life time high levels. India’s forex reserve stood at $615 bn as on December 15, 2023.
Auto Inc is very optimistic particularly for Passenger vehicle segments in CY2024. There will be new launches over two dozen models to be introduced in 2024, line up to electric vehicle as well as facelifts of existing vehicles. New launches typically add 8% to 10% of total volume for automobiles, potentially translating into 250,000-300,000 units of incremental volume, taking the domestic aggregate to a record 4.3-4.4 million units next year.
Global Market Update
“US Indices particularly DOW Jones & Nasdaq 100 hitting life time high at beginning of this week, propelled by mounting anticipation of an interest rate cut by FED in march. US consumer spending data came out better than expected indicating resilience in economy. Softening PCE data indicating CPI to remain moderate in coming months. Q3 CY 2023 third GDP estimates showing increase at annual rate of 4.9%. The increase in the third quarter primarily reflected increases in consumer spending and inventory investment. Geopolitical uncertainties in the Middle East continued to lift risk premium in the oil market. Analysts pointed to the prospects of a prolonged Israeli military campaign in Gaza and Iran’s increasing involvement in the conflict. Although major shipping firms said they were returning to the Red sea route following the formation of a US-led maritime task force mandated to protect commercial vessel in the area.
Primary Market Update:
“The Indian primary market witnessed another busy week of 2023 from December 23 to December 29, 2023 , featuring a roster of new offerings and multiple new listings. This year has emerged as the epitome of IPO activity, witnessing a flurry of companies making their way to Dalal Street to secure funds . Half a dozen companies got listed in the Indian equity market this week. Muthoot Microfin, Suraj Real Estate Developers, Motisons Jewellers, Credo Brands, Happy Forgings, RBZ Jewellers, Azad Engineering together, these companies have raised Rs 3,910 crore and have garnered subscriptions between 12 and 173 times.
About Pantomath Financial Services Ltd: -
In a decade, Pantomath has become one of the fastest-growing financial services
groups backed by Investment banking, Fund management, and distribution verticals.
The Group has recently expanded into wealth management, fin-tech, stock broking,
and distribution by acquiring a significant stake in Asit C Mehta Financial Services
Limited, a 40-year legacy created by Deena Mehta and Asit C Mehta.