Poll results are seen as positive for the overall long-term economic development of the country.

By MAHAVIR LUNAWAT

India has become the 2nd largest IPO market. With election results being out, the continuation of existing policies is highly expected which will fuel the IPO boom further. We witness significant capital to be deployed in public markets & strong demand for new-age as also conventional companies.

We believe that companies with good fundamentals will go public & attract large amounts of capital from street. The upcoming Union Budget will be a crucial trigger for understanding the new government’s strategy for the economy.

Volatile Market: The Indian market remained highly volatile throughout the week, as anticipated. Sharp fluctuations were witnessed following the results of the Lok Sabha general elections 2024. The results came out below the expected poll by various news agencies. BJP got short of decline in voting seats as compared to earlier mandate of 2014 and 2019 general election results but finally tally of 272 is came out with support of allies.

The NDA (BJP and allies) reached final count of 292 seats. Consequently, the existing government will continue for 3rd term under leadership of Prime Minster Narendra Modi. This development is seen as positive for the overall long-term economic development of the country, with optimism surrounding the continuation of policies and reforms. We continue to maintain a medium to long-term positive outlook for the Indian equity market.

On the economic data front, GST collections for May 2024 amounted to Rs 1.73 lakh crore marking a 10% year-on-year increase. India’s growth surged to 8.2% in FY24, driven by a better-than-expected 7.8% expansion in the March quarter, surpassing the anticipated 6.7% growth.

This growth was propelled by robust manufacturing activity. The centre also contained its fiscal deficit at 5.6% of GDP in FY24, beating revised estimate of 5.8% on the back of improved resource mop-up and curtailed revenue expenditure, putting in on track to adhere to the glide path. India’s core sector comprising eight major industries grew 6.2% in April, higher than 6% in the previous month.

With the exception of fertilizers, the output of all industries increased. Furthermore, India’s foreign exchange reserves stood at $646.67 billion as of May 24, 2024.

Corporate India’s performance in the march 2024 quarter was on expected lines with year-on-year double digit growth in aggregate net profit and single digit increase in Revenue. The non-landing companies reported moderate expansion in operating margin helped by favourable commodities prices and better cost control.

Corporate growth in the current fiscal year (FY25) is expected to be healthy given peaking interest rates and expected continuity of government policies. RBI Monetary Policy meet ended on 7th June, 2024, Monetary Policy Committee has chosen to maintain the policy repo rate at 6.5% for the eight consecutive time and continue with stance of “withdrawal of accommodation”. The standing deposit facility (SDF) rate remains unchanged at 6.25%, while both the marginal standing facility (MSF) rate and the bank rate stand firm at 6.75%.

RBI raised its GDP growth forecast for FY25 to 7.2% from 7% earlier and retained FY25 inflation forecast at 4.5%. RBI Governor said that uncertainties would continue to weigh on the inflation outlook amid ongoing deflation in fuel, but food inflation remained elevated.

The HSBC India Manufacturing PMI came in at 57.5 in May 2024, below preliminary estimates and market forecasts of 58.4, this signalled a slower but still substantial improvement in the country’s manufacturing sector, amid a softer rise in new orders and output. The HSBC India Services PMI fell to 60.2 in May from 60.8 in April. India’s services sector growth softened to a five-month low in May following stiff competition, price pressures, and a severe heatwave. Looking forward market continue to eye budget and monsoon development in near term.

Positive Global Market: US market trend remained positive for the week. The ISM Manufacturing PMI unexpectedly edged lower to 48.7 in May 2024 from 49.2 in April, below forecasts of 49.6. The reading showed another contraction for the manufacturing activity as demand was soft again. While weaker data increases the likelihood of interest rate cuts. Market participants are expecting that US Federal Reserve could lower borrowing costs twice this calendar year and begin with first rate cut in September calendar this year. Q1CY2024 GDP growth second estimates came around 1.3% showing contraction of earlier readings of 1.6% growth. The second estimate comes with downward revisions to consumer spending, private inventory investments, and federal government spending. These were some of the factors lowering the GDP estimate by 30 bps in the second estimate.

The ECB lowered the three key interest rates by 25 basis points to 4.25% in recent policy meet ended on 7th June,2024 in line with expectations, marking a shift from nine months of stable rates after inflation declined by more than 2.5 percentage points since September 2023. However, Policy makers signalled a cautious approach to further rate cuts. They said that price pressures remain strong and inflation is likely to stay above target well into next year and interest rates will be kept sufficiently restrictive for as long as necessary to ensure inflation returns to 2%.

Brent crude oil prices declined for the third straight week as the latest OPEC+ decision raised concerns over possible supply surplus. OPEC+ agreed on recent meet on 2nd June 2024 to extend most of its supply cuts into 2025, but announced plans to gradually phase out some voluntary output cuts from eight member countries starting in October. It’s trading around $79 to $80 per barrel. Investors now look ahead to the monthly US jobs report for more clues on the Fed’s monetary policy path. (The author is Managing Director, Pantomath Capital Advisors Pvt. Ltd. – A Leading Mid-Market Investment Bank)