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Cautious on the near-term return potential for markets

After hitting a new all-time high during the month, the Nifty50 closed flat in January. The mid-cap and small-cap indices continued their upward trajectory with the Nifty Mid-Cap 100 Index and the NSE Small-Cap 100 Index closing the month with gains of 5.2% and 5.8% respectively.

The 3QFY24 results announced till January 2024 were largely in line with expectations, with Healthcare and Cement sector companies reporting inline or better than expected numbers and Real Estate, Retail and Consumer sector companies reporting disappointing earnings. Thirty-three of the Nifty50 companies, which declared result until 1st February, 2024, reported YoY growth of 6%/15%/21% in their aggregate Sales/EBITDA/PAT. During January, indices for Banking, FMCG and Metals underperformed the broader market while indices for Oil & Gas, Real Estate, Power and Healthcare outperformed. Other key developments for the month were the US Fed status quo meeting minutes indicating that interest rates in US will remain elevated for longer, the National Statistical Office of India estimating India’s FY2024 real GDP growth at 7.3%, and the IMF raising  India’s FY2025 GDP forecast by 20 bps to 6.5%.

On the domestic macro-economic front CPI inflation in December came in at 5.7% compared to 5.6% in November, while November 2023 factory activity moderated sharply to 2.4% from 11.6% in October. In the recent Interim Budget, the Government reiterated its focus on fiscal consolidation as FY2025 fiscal deficit was budgeted at 5.1%, with a target to bring it down further, to 4.5% in FY2026, was reiterated. The consecration of the temple for Lord Ram in Ayodhya was a key political development in January, as this event is expected to boost the image of the ruling party. Through January, FPIs were net sellers to the tune of USD 3.1 bn while DIIs remained net buyers to the tune of USD 3.2 bn.

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