Summary
Market outlook in July 2024 remains almost unchanged from last month as Global economic dynamics shifts to protectionism, inflation tapers, and India’s growth outlook remains robust amid geopolitical tensions. Nilesh highlights the opportunities in Indian Markets, particularly Consumer and banking sectors as well as long duration debt and gold investments.
Global Economy
- The global economic landscape is shifting towards protectionism. Countries like India benefit due to a favourable democratic structure and focus on execution.
- Inflation rates across the globe are beginning to decline, which is crucial for central banks. However, geopolitical events may still pose risks to sustained price stability.
- IMF forecasts global growth to remain stable led by China, India, US and Russia. Japan growth for the first time surpasses China and Chinese manufacturing remains in expansionary zone.
- The U.S. Federal Reserve has skilfully managed interest rates without causing drastic liquidity withdrawal, resulting in a lower chance of recession over the next year. US growth has been driven by large amount of debt.
Indian Economic Outlook
- India’s GDP growth for FY24 exceeded expectations, supported by rising tax collections and a surplus in the current account balance, indicating strong economic momentum.
- With uncertainties behind, corporate investments are expected to rise, bolstered by government initiatives and improved economic conditions.
Investment Outlook
- Indian equity markets are approaching record highs, we prefer overweight in largecaps, marginally underweight in midcaps and underweight in smallcaps.
- The increasing allocation of gold in central bank reserves reflects a trend towards safety and stability amidst fluctuating economic conditions, making gold a favourable investment.
- With an expectation of falling rates and rising global interest in Indian Bonds, longer duration funds continue to present an opportunity.
- Considering the liquidity corrections could be short-lived.
Risks
- Risks can arise out of a possible global recession, delayed rate cuts, higher commodity prices or lower earnings trajectory. Geopolitical risks materialising can also cause high volatility.