Market Efficiency Overview: November 2024:
November 2024 was marked by heightened market fluctuations, because the Nifty 50 grappled with a mixture of home and world challenges. Weak second-quarter company earnings, wealthy valuations, and exterior headwinds just like the U.S. Presidential elections and India’s Meeting polls weighed closely on sentiment. The index slipped to a 5-month low in the course of the month and moved inside a tighter vary of 1,274 factors, in comparison with 1,834 factors in October. Market volatility climbed to fifteen from the earlier month’s 12, reflecting rising uncertainty. Regardless of these pressures, the Nifty 50 posted a minor decline of simply 0.31%, the smallest month-to-month lack of the yr. Amongst sectors, IT shares outperformed, advancing 6.8% as optimism round Donald Trump’s election victory boosted hopes for favorable coverage adjustments that might profit Indian tech corporations reliant on U.S. income.
Overseas institutional buyers (FIIs) maintained their promoting streak, withdrawing ₹46,000 crore from Indian equities in November. Though the outflows remained substantial, they had been considerably decrease than October’s file of ₹1.14 lakh crore. A short interval of FII shopping for from November 23 to 25, amounting to ₹11,112 crore, supplied momentary reduction earlier than promoting resumed, with massive withdrawals of ₹11,756 crore and ₹4,383 crore on consecutive days. In distinction, home institutional buyers (DIIs) offered essential help by buying ₹44,000 crore price of equities in the course of the month. Their sturdy participation helped offset a few of the promoting stress from international buyers, stopping steeper losses and lending stability to the market amid a difficult setting.
Sectoral efficiency
Throughout Indian equities, November showcased a combined sectoral efficiency amid heightened market volatility. IT, realty, and PSU banking emerged because the top-performing sectors, every recording positive factors exceeding 6%, pushed by sector-specific tailwinds and improved sentiment. Alternatively, FMCG, power, pharma, and commodities underperformed, dealing with challenges from subdued client demand, rising enter prices, and broader market pressures. Within the following sections, we offer a extra complete examination and detailed insights of some main sectors:
Auto:
The automotive sector in November 2024 exhibited a combined efficiency throughout numerous segments, reflecting differing demand dynamics and market circumstances.
The passenger car section noticed a modest 6-7% year-on-year (YoY) development in home gross sales, pushed by sturdy SUV volumes. Nonetheless, month-on-month (MoM) gross sales declined by 7-9% resulting from seasonal changes post-festive season. Entry-level automobile gross sales confronted slight stress, whereas the SUV section demonstrated strong YoY development of round 20%. General, home PV gross sales remained resilient, with choose sub-segments displaying vital positive factors.
The industrial car section reported flat YoY gross sales however skilled a pointy 20% MoM decline, primarily resulting from weaker demand for heavy vans. Alternatively, passenger carriers within the CV area posted substantial development, with YoY positive factors of over 30% in some classes. Transferring ahead, low single-digit development is anticipated for FY25, pushed by gradual enhancements in fleet utilization and alternative demand within the medium and heavy industrial car (MHCV) section.
Two-wheeler gross sales introduced a combined image, with home volumes remaining flat YoY whereas exports surged by 32%. The festive season offered momentary help to home gross sales, which had been additional bolstered by rising rural demand and new mannequin launches. Dispatches grew 3% YoY total, however particular person efficiency throughout producers diverse.
The three-wheeler section skilled a combined development, with notable YoY declines in home dispatches for some producers, whereas others achieved sturdy development. This divergence highlights uneven demand restoration on this section.
Tractor gross sales remained regular YoY in November however noticed a steep MoM decline of roughly 50% resulting from seasonal elements. A restoration in demand is anticipated within the latter half of FY25, supported by favorable agricultural circumstances, together with above-average monsoon rainfall, improved reservoir ranges, and a promising Rabi harvest.
The automotive business continues to navigate a diverse restoration trajectory. Whereas sure segments, akin to SUVs and passenger carriers, show sturdy development potential, challenges persist in different areas, akin to heavy vans and entry-level vehicles. A mix of rural demand, agricultural resilience, and selective alternative cycles is predicted to form the sector’s efficiency within the coming months..
Chemical compounds:
The chemical compounds sector skilled a widespread decline in costs on a month-on-month foundation in November 2024, persevering with to regulate from the height ranges witnessed in the course of the pandemic. Most chemical compounds exhibited a downward development, with acetone costs registering the steepest fall at 10%. Different vital declines included TDI and IPA, which dropped by 9% and eight%, respectively, whereas MEG, acetonitrile, and acetic acid noticed reductions starting from 4% to eight%. Heavy soda ash was the only exception, sustaining steady pricing in the course of the month.
This broad-based value correction highlights the sector’s shift towards normalization amid easing supply-demand imbalances. Whereas home demand remained regular, heightened competitors from Chinese language producers has intensified pricing pressures, notably inside the commodity chemical compounds section.
Within the close to time period, the commodity chemical compounds section is predicted to stay range-bound, supported by first rate home consumption. Nonetheless, in the long term, corporations that target creating value-added merchandise and advancing up the worth chain with enhanced scale and complexity are more likely to outperform. Such strategic shifts present higher insulation from aggressive pressures and pave the way in which for sustained development in comparison with a reliance on commodity-focused operations.
The chemical compounds business’s trajectory will largely hinge on balancing steady home demand with the worldwide aggressive panorama, notably the affect of pricing from Chinese language markets.
Metals:
In November 2024, Indian metal costs noticed a slight dip of 0.6% month-on-month (MoM), reaching Rs 47,700 per tonne, whereas Chinese language metal costs fell extra sharply by 4.9% MoM to $485 per tonne. Coking coal costs remained steady at $170 per tonne, owing to weaker demand in world markets. Home metal manufacturing in India rose by 6.8% YoY, reaching 12.5 million tonnes in October 2024, whereas Chinese language metal manufacturing additionally noticed a rise of 6.2% MoM, reaching 82 million tonnes. Nonetheless, world metal manufacturing declined by 5.9% MoM, totalling 152 million tonnes.
Chinese language metal exports continued to surge, rising by 10.1% MoM and 40.8% YoY to 11.2 million tonnes, marking the very best stage in 9 years. This uptick in exports displays weak home demand in China, regardless of a number of stimulus packages. The continued elevated exports from China stay a priority for the worldwide metal sector, placing stress on home metal costs.
Within the enter markets, home iron ore costs fell by 2% MoM to Rs 7,250 per tonne, whereas worldwide costs rose by 1.8% to $97 per tonne. Manganese costs noticed a decline of three% MoM, dropping to Rs 15,560 per tonne.
The non-ferrous metals section additionally skilled a correction, with aluminium costs slipping by 0.6% MoM to $2,577 per tonne. Copper costs fell extra sharply by 5.2% MoM to $9,011 per tonne, primarily pushed by disappointing demand expectations in China. Zinc costs dropped by 2.6% MoM to $3,109 per tonne, reflecting weak demand linked to the sluggish actual property market in China.
Wanting forward, India’s metal sector may benefit from decrease enter costs, with home iron ore costs dropping and steady coking coal costs doubtlessly bettering margins for Indian steelmakers within the coming quarters. Moreover, the Indian Metal Ministry’s proposal for a 25% responsibility on sure metal imports might present some help for home costs. Regardless of agency home demand projections of 8%-9% development in FY25, the wealthy valuations of metal corporations restrict potential upside, resulting in a impartial outlook for the sector within the close to time period.
Motels:
The inns sector continued its sturdy efficiency in November 2024, with year-on-year (YoY) development in common day by day price (ADR) throughout each decrease and better value bands. The ADR noticed a formidable enhance of 17.6% within the cheaper price band and 27.3% within the greater value band in comparison with November 2023. Among the many key home markets, Bengaluru and Goa stood out with a major uptrend in lodge costs, each seeing a development of over 30% YoY resulting from sustained demand. Different markets additionally skilled wholesome double-digit ADR development, reflecting total sturdy efficiency throughout the sector.
The addition of recent inns continued at a wholesome tempo, with organized gamers specializing in increasing their presence by administration contracts and licensing agreements, relatively than possession, to keep up monetary flexibility. This technique has enabled them to capitalize on the rising demand in India’s hospitality business. The speedy growth of India’s luxurious hospitality sector, pushed by rising disposable incomes, altering traveler preferences, and infrastructure enhancements, has resulted in a surge in demand for premium experiences. This development is clear in each tier-one and tier-two cities, attracting each home and worldwide lodge manufacturers.
The sector maintained its development trajectory by Q3 2024, registering a ten.8% enhance in income per accessible room (RevPAR) pushed by greater ADRs. On a quarter-on-quarter (QoQ) foundation, the sector continued to carry out effectively, marking a 2% enhance in RevPAR from Q2 2024 to Q3 2024. This displays the sector’s constant upward motion because it advantages from sturdy demand and a positive market setting.
Essential occasions & updates
A number of essential occasions of the final month and upcoming ones are as beneath:
- India’s GDP grew by 5.4% YoY within the September 2024 quarter, slowing from 6.7% within the earlier quarter and falling in need of the 6.5% market expectation, marking the weakest development since December 2022.
- India’s infrastructure output rose by 3.1% YoY in October 2024, up from 2% in September, recording the very best development in three months.
- The HSBC India Manufacturing PMI fell to 56.5 in November 2024, down from 57.3 and October’s 57.5, indicating slower development in new enterprise and manufacturing amid sturdy demand, competitors, and value pressures.
- The HSBC India Providers PMI was revised to 58.4 in November 2024, beneath the preliminary 59.2 and October’s 58.5, marking the fortieth straight month of development, pushed by sturdy demand and new enterprise positive factors.
- The HSBC India Composite PMI was 58.6 in November 2024, beneath the flash estimate of 59.5 and October’s 59.1, marking the fortieth consecutive month of growth in non-public sector exercise.
- The RBI saved the repo price at 6.5% for the eleventh straight assembly in December and minimize the CRR by 50bps to 4%, its first discount since April 2020, to spice up liquidity forward of tax outflows.
Elementary outlook:
India’s financial outlook stays optimistic, pushed by a number of favorable structural elements that place the nation effectively for long-term development regardless of short-term challenges. The steady political panorama, ongoing infrastructure improvement, and an emphasis on capital expenditure (Capex) are key drivers of credit score development, which in flip helps Indian equities. In consequence, the fairness market is predicted to ship double-digit returns over the following 2-3 years, supported by strong earnings development. Though GDP development in Q2FY25 fell beneath expectations at 5.4%, this slowdown might be attributed to momentary elements such because the Loksabha elections, widespread flooding, and decreased authorities spending. Regardless of this, a powerful restoration in earnings is anticipated within the second half of FY25, pushed by elements akin to elevated authorities Capex, post-monsoon actions, a rise in wedding-related spending, and an anticipated rural demand pickup. The Reserve Financial institution of India’s (RBI) resolution to scale back the Money Reserve Ratio (CRR) and take measures to make sure liquidity additional strengthens the economic system’s development prospects, because it mitigates any liquidity considerations.
Wanting forward, the Indian economic system is predicted to maintain its development momentum. The RBI has revised its actual GDP development forecast for FY25 down to six.6% from 7.2%, however the outlook for the second half of the yr stays sturdy, with projected development of 6.8% in Q3FY25 and seven.2% in Q4FY25. This development is anticipated to be pushed by authorities spending, a restoration in rural demand, and robust exterior commerce. Inflation, which had been a priority earlier in FY25, is projected to average, with the RBI anticipating it to return to 4% by Q2FY26. This can be supported by easing meals costs as the brand new crop season arrives and steady oil costs. The RBI’s CRR minimize will inject Rs. 1.16 trillion into the banking system, offering ample liquidity. Furthermore, measures akin to rising the ceiling on FCNR deposits will assist enhance capital inflows, additional supporting the economic system. With these supportive elements in place, India’s development trajectory stays optimistic, underpinned by each home and world drivers.
Technical outlook.
India’s macroeconomic indicators proceed to mirror a powerful financial basis. The infrastructure sector registered a 3.1% year-on-year development in October 2024, the very best in three months. The manufacturing sector stays sturdy, with the Manufacturing PMI for November 2024 at 56.5, indicating stable development in manufacturing and new enterprise regardless of some moderation. The Providers PMI was revised to 58.4, sustaining wholesome growth within the providers sector, whereas the Composite PMI at 58.6 additional helps the view of continued development within the non-public sector. On inflation, the RBI has famous dangers stemming from meals and core inflation however anticipates moderation within the coming months, supported by a positive base impact and steady oil costs. The mixture of bettering liquidity, sturdy infrastructure exercise, and a resilient manufacturing and providers sector alerts continued development for India.
Outlook for the World Market
US Market:
The US market continues to draw file ranges of funding, buoyed by the nation’s sturdy financial efficiency. With most economists projecting continued development into 2025, the US has proven spectacular restoration from excessive inflation, setting a benchmark for different developed nations. Optimistic credit standing tendencies are anticipated to persist, with debt defaults more likely to lower in 2025. The incoming Trump administration’s promise of deregulation, notably within the monetary and power sectors, provides to the optimistic sentiment, additional driving investor confidence. Nonetheless, uncertainty stays resulting from potential sweeping coverage adjustments, notably round tariffs and commerce relations with key companions like China, Mexico, and Canada. In November, the “Trump commerce” dominated markets, with the US Greenback strengthening on expectations of tariffs, whereas Bitcoin surged amid talks of a crypto reserve. The inventory market additionally rallied on hopes for tax cuts, although tensions in Ukraine and commerce frictions with China created volatility.
The US economic system is projected to develop at 2.3% in 2024, with continued growth anticipated in 2025, supported by sturdy client spending and company funding. Inflation is predicted to rise to 2.9% by year-end resulting from difficult year-on-year comparisons however will ease to 2.5% by the top of 2025. The labor market is predicted to point out indicators of cooling, with the unemployment price rising barely to mid-4% in 2025. The Federal Reserve is anticipated to chop short-term charges to 4.25%-4.5% in December 2024, with additional reductions in 2025. Nonetheless, aggressive price cuts are unlikely resulting from potential inflationary pressures, particularly if tariffs are enacted. Whereas the US economic system stays resilient, a number of dangers might weigh on market sentiment. Tariff will increase might reignite inflation and pressure credit score markets, notably for lower-rated debtors. Moreover, geopolitical tensions and climate-related dangers to bodily property might additional complicate the outlook.
For buyers, sectors poised to profit from deregulation, akin to financials and power, provide promising alternatives. Nonetheless, with the specter of greater tariffs looming, particularly on China and different buying and selling companions, short-term warning could also be required in client items and know-how shares. Fastened-income markets might see positive factors within the brief time period resulting from anticipated price cuts, however rising inflation and geopolitical dangers might dampen returns over time.
The advice for our buyers is cautiously optimistic. Whereas the US economic system reveals sturdy development potential, cautious consideration to coverage adjustments, geopolitical dangers, and sector-specific dynamics can be important for navigating the market in 2025.
Outlook for Gold
Gold costs in India have surged resulting from geopolitical dangers, world uncertainties, and expectations of coverage easing. Regardless of latest volatility, gold ended November 2024 close to Rs 78,000 per 10 grams for 24K gold, marking a 22% enhance for each 22K and 24K gold because the begin of the yr. The Reserve Financial institution of India’s stance on rates of interest, together with expectations of additional price cuts by the US Federal Reserve, has additionally supported gold costs. Geopolitical tensions and potential tariff threats from the US proceed to drive demand for gold as a safe-haven asset.
What ought to Buyers do?
Given the present financial setting, we advocate a cautious method at this stage, advising buyers to keep away from bulk investments. Whereas the medium-to-long-term outlook for the Indian economic system stays optimistic, pushed by favorable structural elements, we’re seeing indicators of short-term volatility that might impression market efficiency.
India’s financial fundamentals proceed to current a optimistic long-term development story. The nation’s steady political regime, ongoing capital expenditure (Capex) tasks, and bettering credit score development are anticipated to drive sustained earnings development over the following 2-3 years. Regardless of this, latest financial information, such because the Q2FY25 GDP development falling in need of expectations at 5.4%, alerts some short-term challenges. The RBI’s downward revision of its FY25 GDP development forecast to six.6% additional displays the financial slowdown within the first half of the yr, although restoration is anticipated within the latter half.
Moreover, inflation considerations have resurfaced, with the RBI revising its inflation forecast for FY25 upward to 4.8%, in comparison with the sooner estimate of 4.5%. The present inflationary pressures, together with the latest GDP miss, point out that whereas the economic system is displaying indicators of restoration, it should take time for development to completely stabilize. This has prompted the RBI to take a extra cautious stance, conserving the repo price unchanged whereas offering liquidity help by a 50bps CRR minimize.
Moreover, India’s VIX is presently beneath its long-term common, indicating that the market is in a impartial zone, neither too unstable nor overly optimistic. This impartial positioning suggests potential market fluctuations within the brief run, making it an opportune time to train warning.Given these elements—financial slowdown considerations, upward inflation revision, and market volatility—we advocate that buyers undertake a extra measured method within the present setting.
Disclaimer:
This text shouldn’t be construed as funding recommendation, please seek the advice of your Funding Adviser earlier than making any sound funding resolution.
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