July 2024 Indian Market Recap:
In July 2024, the Indian inventory market displayed a combined bag of outcomes, with notable variations in efficiency throughout numerous indices and sectors. The BSE Sensex noticed a 3.43% rise, reaching a peak of 81,908. This upward motion mirrored robust market sentiment and heightened investor confidence, significantly in blue-chip shares. The Sensex’s constructive trajectory was pushed by favorable financial knowledge and sturdy company earnings, signaling a steady and optimistic market outlook.
The Nifty 50 index outshone the Sensex, climbing 3.92% to attain a brand new excessive of 24,999. This efficiency was largely fueled by vital positive aspects in key sectors like know-how and shopper items. The spectacular progress of the Nifty 50 underscores investor confidence in large-cap shares and highlights the resilience of main market sectors.
International Portfolio Investments (FPIs) had been web patrons in July 2024, with an influx of ₹324 billion, up from ₹266 billion in June. This introduced the year-to-date (YTD) inflows for CY24 to ₹356 billion, though that is decrease in comparison with ₹1,230 billion in CYTD23. FPIs confirmed robust curiosity in sectors like IT, Metals, Auto, Healthcare, and Capital Items, whereas sectors akin to Monetary Companies, Energy, Building, and Shopper Durables witnessed outflows.
On the overseas alternate entrance, India’s foreign exchange reserves soared to an unprecedented degree of $667.4 billion in July 2024, surpassing the earlier file of $652 billion set in June 2024. This surge was pushed by the fluctuations in non-US currencies, such because the euro, pound, and yen, throughout the reserves. Moreover, the Reserve Financial institution of India (RBI) carried out efficient financial insurance policies and maintained vigilance, which strengthened its management over foreign money administration amid world geopolitical tensions and value instability.
Commodity costs additionally continued their downward pattern, influenced by coverage tightening and expectations of a slowdown in world financial progress. The Indian Rupee (INR) remained largely steady all through April, Might, and June 2024. Nonetheless, some depreciation was famous in July 2024 because of a stronger US greenback. The current enhance within the Financial institution of Japan’s benchmark rate of interest by 15 foundation factors to 0.25% led to the unwinding of carry trades, additional boosting the US greenback in early August 2024.
Sectoral efficiency
In July 2024, the Indian inventory market noticed diverse performances throughout sectors. The Info Expertise (IT), Prescription drugs (Pharma), Quick-Shifting Shopper Items (FMCG), and Insurance coverage sectors emerged as high performers. These sectors benefited from a powerful US greenback and favorable macroeconomic situations, resulting in spectacular returns. The IT and Pharma sectors, particularly, noticed vital positive aspects because of sturdy demand and foreign money benefits.
Conversely, the Realty, Banking, and Automotive (Auto) sectors underperformed. The Realty sector confronted challenges, leading to subdued market exercise, whereas the Banking sector struggled because of investor warning and sector-specific pressures.
Within the following sections, we offer a complete examination and detailed insights of some main sectors:
Auto:
The Indian automotive trade confirmed constructive momentum in July 2024, with retail gross sales rising by 14.1% year-over-year (YoY) to achieve 20.3 lakh models. This progress was largely pushed by robust performances within the two-wheeler and passenger car segments, each of which benefited from favorable financial situations and market dynamics.
Two-Wheelers:
- ∙ Gross sales surged by 17.2% YoY, reaching roughly 14.4 lakh models. This progress was bolstered by a thriving rural financial system, constructive results of a great monsoon, and the introduction of recent merchandise. Authorities assist packages geared toward enhancing rural incomes additionally performed a major function, together with excessive stock ranges. The outlook for the two-wheeler section stays constructive, with expectations of additional progress throughout the upcoming festive season, supported by new mannequin launches and ongoing gross sales promotions.
Passenger Autos:
- ∙ The passenger car section noticed a 10.4% YoY enhance in gross sales, totaling 3.2 lakh models. This progress was supported by excessive discounting because of extra provide, the supply of recent fashions, and continued gross sales promotions. The section is anticipated to keep up its progress trajectory, pushed by comparable elements within the close to time period.
Business Autos:
- ∙ Gross sales on this section recorded a modest 5.9% YoY enhance. Whereas there was progress in development and mining actions, steady rainfall, restricted finance availability, and excessive car costs tempered the general progress on this class.
Three-Wheelers:
- ∙ The three-wheeler section skilled a 17.2% YoY rise in gross sales, pushed by greater gross sales of electrical three-wheelers, first-time patrons coming into the market, and engaging promotional affords. The introduction of recent fashions and ongoing gross sales promotions are anticipated to maintain the expansion on this section.
Outlook:
- The general outlook for the auto sector stays cautiously optimistic. Whereas sure segments like two-wheelers and passenger autos are anticipated to proceed their robust efficiency, challenges akin to excessive car costs and finance availability could restrict progress in business autos. The festive season and ongoing gross sales promotions, coupled with new product launches, are more likely to additional assist the sector’s efficiency within the coming months.
Chemical:
The chemical trade in July 2024 skilled a decline in costs throughout numerous segments, primarily because of a subdued enterprise outlook in end-user industries that has dampened demand for chemical merchandise. This decline in chemical costs occurred alongside a slight enhance in crude oil costs, reflecting shifts in demand-supply dynamics and evolving market situations within the broader industrial panorama.
Regardless of these challenges, India’s chemical sector stays resilient, pushed by a number of constructive elements. World corporations are more and more seeking to supply chemical substances from India as a part of their technique to de-risk provide chains, which is anticipated to assist the sector in the long term. Moreover, the growing share of specialty chemical substances within the general product combine and vital capital expenditures by chemical corporations to seize future progress alternatives point out a powerful basis for the sector.
Within the medium time period, the outlook for Indian chemical corporations stays cautious. Current quarters have proven combined efficiency throughout the trade, with some segments going through challenges because of elements akin to risky crude oil costs, greater logistics prices, and provide chain disruptions. Nonetheless, the worst of those challenges could also be behind the sector, and gradual enchancment is anticipated because the enterprise outlook turns extra constructive.
The primary half of FY25 is anticipated to see a gradual restoration within the sector, with extra vital enhancements projected within the second half. The normalization of crude oil costs, logistics prices, and provide chain points will possible result in higher efficiency throughout the trade. Moreover, the restoration in demand from numerous end-user industries and better utilization ranges amongst chemical corporations sign a constructive long-term outlook for the sector.
Nonetheless, the agrochemical trade could proceed to face challenges because of excessive stock ranges and chronic pricing pressures globally. These challenges could also be considerably mitigated by favorable home monsoon situations, which may assist demand within the Indian market. Total, whereas the chemical sector faces some headwinds, the long-term outlook stays constructive as restoration traits take maintain and exterior challenges step by step subside.
Banking:
The banking sector, significantly within the bank card section, continued to point out progress in June 2024, albeit with some combined alerts. The entire worth of bank card transactions rose by 15.7% year-over-year (YoY), reaching ₹1.6 lakh crore, persevering with the constructive pattern from Might. Non-public sector banks, particularly, skilled a 17.8% YoY enhance within the worth of those transactions, reflecting sturdy shopper spending and elevated utilization of bank cards.
Nonetheless, regardless of the rise in whole transaction worth, the typical bank card spend in June declined by 2.3% YoY to ₹15,534.6 and fell 4.4% month-over-month (MoM), largely because of a excessive base in Might. This implies a slight dip in per-card spending, probably indicating extra cautious shopper conduct or a shift in spending patterns.
The variety of excellent bank cards additionally grew, however solely marginally by 0.5% MoM to 10.4 crore in June. This marks the slowest fee of progress in excellent playing cards since October 2022, indicating a possible plateau within the growth of the bank card market.
Trying forward, whereas the banking sector continues to learn from elevated transaction volumes, the slowdown within the progress of excellent bank cards and the decline in common spending per card recommend a cautious outlook. Banks could have to give attention to methods to stimulate shopper spending and preserve progress within the bank card section.
Essential occasions & updates
A number of vital occasions of the final month and upcoming ones are as under:
- CPI inflation in July dropped to three.54%, marking its lowest degree since August 2019. In the meantime, the Index of Industrial Manufacturing (IIP) grew by 4.2% in June.
- The HSBC India Manufacturing PMI barely decreased to 58.1 in July 2024, down from 58.3 in June, and revised from the preliminary estimate of 58.5. This was additionally decrease than the market forecast of 59. Regardless of the decline, the newest studying remained above the long-term common for the collection and was nonetheless among the many highest ranges seen in recent times.4) The HSBC Flash India Composite PMI was revised right down to 60.7 in July 2024 from an preliminary estimate of 61.4, following June’s 60.9. This marked the thirty sixth consecutive month of progress in non-public sector exercise.
- The HSBC India Companies PMI was revised to 60.3 in July 2024, down from the preliminary estimate of 61.1 and barely decrease than June’s 60.5. Regardless of the revision, this marked the thirty sixth straight month of progress in providers, indicating continued robust enterprise exercise.
- The HSBC Flash India Composite PMI was revised right down to 60.7 in July 2024 from an preliminary estimate of 61.4, following June’s 60.9. This marked the thirty sixth consecutive month of progress in non-public sector exercise.
- Deposit progress in India was reported at 10.6% in July 2024, down from 11.3% within the earlier launch.
- Infrastructure output in India elevated by 4% year-on-year in June 2024, following a 6.3% rise in Might. The slower progress was because of a contraction within the output of crude oil, which fell by 2.6% in comparison with a 1.1% decline in Might, and petroleum refinery merchandise, which decreased by 1.6% after a slight enhance of 0.5% within the earlier month.
RBI MPC Meet abstract:
- Repo Price Unchanged: The MPC saved the coverage repo fee at 6.5% for the ninth consecutive assembly, specializing in inflation management whereas step by step withdrawing its accommodative stance.
- GDP Development Confidence: Sturdy financial indicators have allowed the RBI to keep up its FY25 GDP progress projection at 7.2%, supported by sturdy funding demand, regular city consumption, and rising rural consumption.
- ∙ Inflation Focus: The RBI stays dedicated to lowering inflation to a sustainable 4.0% goal, regardless of challenges from ongoing meals inflation.
- No Speedy Price Cuts Anticipated: The repo fee, together with different key charges, is anticipated to stay unchanged till Q3 FY25.
- Inflation Projections Secure: CPI inflation for FY25 is projected at 4.5%, assuming a standard monsoon. Meals inflation, significantly in greens, stays a major contributor to headline inflation.
- Financial Exercise Resilient: Manufacturing and providers sectors proceed to increase, with robust indicators just like the Buying Managers’ Index (PMI) reflecting ongoing financial resilience.
- ∙System Liquidity: Liquidity within the system shifted from a deficit to a surplus in July 2024, with the RBI guaranteeing orderly cash market rates of interest by way of versatile liquidity administration operations.
Elementary outlook:
India’s financial panorama stays sturdy, with vital progress in numerous sectors. Electrical energy demand surged by 8% in July 2024 because of excessive heatwaves and elevated industrial and residential utilization. This upward pattern is anticipated to stick with the arrival of summer time. Moreover, UPI transactions reached an all-time excessive, reflecting robust progress towards a digitized financial system and a rebound within the providers sector.
Foreign exchange reserves climbed to a file $667.4 billion in July 2024, bolstered by efficient financial insurance policies and foreign money stability. The Reserve Financial institution of India (RBI) saved its coverage fee regular at 6.5% within the August 2024 MPC assembly, indicating confidence within the financial system’s resilience. The RBI’s constant strategy to financial coverage, with inflation projected at 4.5% and GDP progress forecasted at 7.2%, helps this optimism.
Fiscal coverage has additionally been supportive, with the subsidy finances diminished to 2.7% of GDP, reflecting improved financial situations. Enhanced allocations for infrastructure, together with railways, roads, and concrete growth, show the federal government’s dedication to progress. GST revenues remained robust at ₹1.82 lakh crore, highlighting a wholesome fiscal place and efficient tax assortment.
Technical outlook.
Technically, the Indian inventory market is displaying a constructive pattern. Regardless of a minor decline within the Manufacturing PMI to 58.1 and the Companies PMI to 60.3, each indicators stay above the edge for growth, suggesting continued progress. Main indices just like the BSE Sensex and Nifty 50 have demonstrated resilience, supported by robust home fundamentals and favorable liquidity.
The record-high UPI transactions and sturdy foreign exchange reserves contribute to a steady market atmosphere. Nonetheless, traders ought to be cautious of potential short-term fluctuations pushed by rising enter prices and inflationary pressures. Whereas the general market pattern is constructive, staying knowledgeable about sector-specific developments and financial knowledge will probably be important for strategic funding selections.
The first assist degree for the Indian market stands at 24000, with a significant resistance at 23500. Conversely, the first resistance degree is at 24550, with a significant resistance at 24,800.
Outlook for the World Market
US Market:
The U.S. market outlook is marked by ongoing challenges with inflation, which, whereas down from its 2022 peak, stays above the long-term goal of two%. In April, the Shopper Value Index rose by 3.4% year-over-year, reflecting persistent inflationary pressures. The trail to lowering inflation has confirmed tougher than anticipated, requiring continued endurance and vigilance.
The central financial institution has maintained its goal rate of interest vary at 5.25% to five.5% since July 2023, the best in over twenty years. Issues linger that these elevated charges and tight financial insurance policies may push the U.S. financial system right into a recession. Regardless of this, the labor market stays comparatively steady regardless that there are indicators of softening, with 175,000 jobs added in April, though this fell wanting expectations.
Nonetheless, the U.S. Treasury yield curve has been inverted since mid-2022, historically a powerful indicator of an impending recession. Present expectations recommend a comparatively decrease likelihood of a recession throughout the subsequent 12 months. Whereas the cooling labor market, slowing financial progress, and softening shopper spending may elevate considerations, these traits may additionally point out that inflation could start to stabilize. The subsequent few months will probably be essential in figuring out whether or not the central financial institution can obtain a “smooth touchdown” for the financial system, balancing inflation management with out triggering a downturn.
Eurozone:
The Eurozone’s financial prospects for the rest of the yr are unsure regardless of modest progress within the second quarter. The financial system expanded by 0.3% from April to June, barely exceeding expectations and matching the expansion fee of the earlier quarter. This progress was largely supported by stronger actual incomes and elevated public spending, indicating a home restoration. Nonetheless, challenges in world commerce and a collection of unfavourable financial surveys have forged a shadow over the outlook.
Among the many main Eurozone economies, France and Spain exceeded forecasts, whereas Italy’s financial system remained steady. Then again, Germany, the area’s largest financial system, noticed an surprising contraction, elevating considerations a few potential prolonged downturn. That is significantly worrying given Germany’s function as a key driver of the Eurozone’s financial efficiency.
Shopper confidence within the Eurozone remained low in July, reflecting broader financial considerations. Moreover, inflation in Germany edged as much as 2.6% in July, with core inflation holding regular at 2.9% for the second month in a row. These elements recommend that whereas the Eurozone has managed to maintain some progress, ongoing challenges in commerce, shopper sentiment, and inflation may create headwinds within the coming months.
Outlook for Gold
In current months, gold costs have largely stabilized, following a interval of constructive momentum. A powerful rally pushed gold above $2425 per ounce, influenced by elements like anticipated rate of interest cuts, rising geopolitical tensions, central financial institution acquisitions, and elevated market volatility.
The most recent finances diminished customs obligation on gold imports from 15% to six%, which led to decrease costs within the home market. In consequence, gold costs decreased by 4% in INR phrases however elevated by 5% in USD phrases over the past month. Trying ahead, gold is anticipated to outperform different asset courses in 2024, particularly as considerations a few potential slowdown within the US financial system proceed to make gold a pretty safe-haven asset.
What ought to Traders do?
Given the current financial knowledge and market traits, we stay assured within the long-term progress prospects of the Indian fairness market. The continued capital expenditure (Capex) surge is strengthening banks and fostering credit score progress, which is anticipated to additional bolster the constructive market outlook. Nonetheless, with present market valuations, which has turn out to be barely costlier, the important thing driver of future returns will possible be a rise in company earnings and world macro.
In gentle of those elements, we advocate sustaining a diversified portfolio and persevering with to take a position available in the market. Asset allocation and sector rotation will probably be essential for producing outperformance in FY25. Whereas present valuations could restrict short-term positive aspects, market dips present a strategic alternative to construct positions in high-quality corporations. Traders ought to give attention to sectors poised for progress, supported by robust fundamentals and constructive earnings prospects.
Given the combined efficiency throughout sectors, with some like IT and shopper items displaying resilience within the present comparatively risky market situation, it’s vital to remain selective and preserve a balanced strategy. We advise utilizing market corrections as alternatives to spend money on essentially robust corporations which can be more likely to profit from the continued financial momentum and long-term progress traits within the Indian financial system.
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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