Global Economy and Market Outlook 2024

We have been talking about the major events of 2023 and discussing trends that shaped the markets but now that we’re past the last year, it’s time to see what is coming up this year. Come with me as I start with the events that might shape the markets and the global economy this year!

From Rate Hikes to Rate Cuts?

The one event that shaped the global markets last year was the Fed’s interest rate hikes. No, actually that was eleven events – 11 cycles of the Fed increasing interest rates to control inflation. The inflation is now finally coming down, with the CPI being 3.1% in November, markets are expecting a couple of cycles of rate cuts now. Now, rate cuts may not be as frequent as hikes as the US economy may have a soft landing from its recessionary trends, but the rate cuts will be good for the market as funds will divert to equities. For Indian markets, this means FII inflows, which have earlier turned negative owing to the high-interest rates and bond yields in the US. 

Geopolitical Tensions 

It’s been a brutal time for global citizens as the Israel-Hamas conflict took shape and the Russia-Ukraine conflict escalated. We have entered 2024 with substantial risks of geopolitical tensions shaking up the global economy. While things may not have been very loud on the news, missiles are still being fired in the disrupted areas. While the Israel-Palestine conflict has not particularly affected the markets yet, it will now if the conflict escalates any further, or if any other nation participates in the war. 

2024 – The Big Election Year

Nationwide elections will take place in over 50 countries this year! Half of the global population will be voting as the elections will take place in nations from the US to the UK to Europe and of course India. US elections that are to be held in November might be the ones to affect global markets the most (obviously!). The Trump-Biden face-off might end up swinging the dollar. In the longer run, elections may not significantly affect the markets, particularly if the same party is reelected but market volatility will shoot up in the weeks preceding and following elections. 

Now that we’ve talked about the global events and their expected outcomes, let’s move closer to home as I talk about what coming up for India. 

Indian Markets and Economy Outlook 2024

Elections at Home

The interim budget is to come very soon and while every year we have big expectations from the budget, this year it might be a bit monotonous as central elections are coming up soon and the ruling government will play it safe with only minor changes expected.

As I discussed while talking about US elections, the elections by themselves do not affect the markets much in the longer run, but the impact is seen in terms of economic and policy reforms as the ruling party takes the seat. This year, we might see some election euphoria if the BJP is re-elected or things will shake up big if the coalition formed by the opposition succeeds in winning enough seats to influence the government. 

Expectations are that we’ll see a re-election of the ruling party as BJP won state elections in November 2023 pointing towards political stability which should be good for the markets. 

Now let’s talk about our favorites, markets, and expected movements in some sectors. 

Equity Markets in 2024 – Bullish still?

2023 was the year of small and midcaps, however, we are now seeing concerns around smallcap valuations, and investors are looking for opportunities in large caps. Diversification is always suggested, and we have just brought back our Smart Index Advantage Smallcase which has 10-15 NIFTY stocks that can outperform the index. This portfolio is great for diversification, however, we still stay confident that there is great value in the smallcap space despite broader overvaluations. Let’s take a look at a couple of sectors to see what I mean:

1. Chemicals 

–  Chemicals is one of the sectors that has underperformed during the last couple of years, but now we are seeing global negative cues easing like China’s dumping of its chemicals and an improvement in China’s domestic demand. 

–  Plenty of companies are struggling to bounce back but we keep on holding these stocks on the back of Sector Tailwinds.

– Significant valuation concerns are prevailing in the markets currently but if you look at the Median PE of the chemical sector, which is 30.35, it is much lower than broader evaluations like NIFTY Midcap 150 index’s PE which is 46.48. 

–  Green Portfolio has been bullish on chemicals and specialty chem and we continue to stay as we expect a turnaround this year. 

2. Pharmaceuticals

–  Pharma again underperformed last year. We have been sticking with pharma’s growth potential this year and continue to have faith in the sector. Pharma has not seen a good time this year due to challenges from the US, but those are easing now and 2024 could be the year for pharma.

–  Much of the pharma products manufactured in India are exported and given the slowdown that the global economy witnessed, the US in particular, India’s pharma stagnated too. However, the US economy is coming out of inflation and this year might be a turnaround for the sector.

–  If we take the valuations of the pharma sector, its median PE too stands at 33.31 against the NIFTY Midcap 150 index’s PE which is 46.48

This is just a small but broad peak into some spaces where value still lies in smallcap. This is just a tiny ratio though, check out our Smallcap Compounders smallcase for more. 

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Green Portfolio is a SEBI Registered (SEBI Registration No. INH100008513) Research Analyst Firm. The research and reports express our opinions which we have based upon generally available public information, field research, inferences and deductions through are due diligence and analytical process. To the best our ability and belief, all information contained here is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable. We make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use.