Market Outlook 2024: Equity, Commodity, Currency
As India sets to become the third-largest economy in the next three years with a GDP of USD 5 trillion, Indian equity, commodity and currency markets are set for an interesting journey. Benchmark indices, the BSE Sensex and Nifty 50, have already climbed record highs, and though the rupee has witnessed some decline amid global turmoil, it has demonstrated resilience.
The commodity market, too, has been subject to some significant changes. So how are they poised to do in the remaining months of this year? Let’s find out.
Equity markets likely to remain robust
Indian equity markets are likely to remain robust in 2024. This can be gauged from the fact the CMIE Total Returns Index (CTRI), which shows how the overall equity market is doing, went up by 6.7% in June 2024. This is after a smaller rise of 1.2% in May 2024. The price-to-earnings ratio (P/E ratio) of the CTRI also saw an uptick. It reached 36.4 times in June 2024, compared to 33.3 times in May 2024. This ratio measures how much investors are willing to pay for each unit of earnings.
The CTRI includes 3,927 actively-traded stocks. The total value of trades in these stocks increased significantly, reaching ₹30.7 trillion in June 2024, up from ₹25.8 trillion in May 2024. Although the CTRI performed better than the Nifty 50 index, it did not do as well as the S&P BSE Sensex.
The Nifty 50 index rose 6.6%, while the S&P BSE Sensex rose 6.9% in June 2024. The P/E ratio for the Nifty 50 was 22.9 times, and for the S&P BSE Sensex, it was 24 times. As per Morgan Stanley, increased domestic investments in stocks, rising social equity and private spending growth could boost earnings by 20% annually over the next five years.
Commodity market also likely to do well
The Indian commodity market is also expected to do well, with its nominal value expected to reach USD 839.40 billion in 2024. In the Union Budget 2024, the Government cut import duty on gold from 15% to 6%, which is in line with market participants' expectations. The emergence of the India International Bullion Exchange (IIBX) at GIFT City as a gateway for importing bullion is set to boost the Indian commodity market significantly.
By channelling all gold imports and exports through IIBX, the market is poised to benefit from a centralised and transparent trading platform. This platform also reduces inefficiencies, minimises the risks associated with multiple intermediaries, and ensures better price discovery. A unified platform also helps standardise practices and reduce discrepancies in gold pricing.
However, one will have to monitor the situation in the Middle East closely, as any major escalation could put pressure on crude oil prices. If crude oil prices go up, this will have a ripple effect on several aspects of the economy.
Indian rupee likely to appreciate against US dollar
The Indian rupee had a stable 2023 and is likely to appreciate against the US dollar in 2024. The rupee showcased exceptional stability against the dollar in the current calendar year, which marked the least volatility seen in nearly three decades. Timely and active intervention by the RBI in the foreign exchange market helped the rupee to a great extent. With the US Federal Reserve sending signals of a potential rate cut, it will benefit the rupee.
If it happens, the same will lead to capital outflows from the US and inflows into emerging markets like India. Investors seek higher returns in markets with better yields, such as India. This increase in capital inflows can strengthen the Indian rupee as demand for the rupee rises when foreign investors buy Indian assets.
Wrapping it up
Several leading institutions are projecting strong growth in the Indian economy, which is likely to benefit the equity, commodity, and currency markets. As an investor, it's crucial for you to follow the core principles of asset allocation, be disciplined, and remain patient.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Please read the SEBI-prescribed Combined Risk Disclosure Document before investing. Brokerage will not exceed SEBI’s prescribed limit.
