Riding the Wave of Economic Resurgence

A few days back, everyone got overwhelmed when a screenshot went viral showing India becoming a $4 trillion economy. But to everyone’s dismay, the news turned out to be false and bogus. I was as disappointed as you were. But hang in there, we’ll achieve this milestone soon. Until then I have something that might compensate for your earlier setback. 

Indian stock markets have been on a bull run in 2023 with the total market capitalization of all BSE-listed companies reaching $4 trillion for the first time on November 30. Yes. Domestic and global factors contributed to the strong performance. Robust economic growth at over 7% in the first quarter of the current financial year and corporate earnings in India supported the markets. India’s GDP expanded by 7.2% in the first quarter and 7.6% in Q2 despite challenges in the global environment. 

Many Indian companies especially in sectors like fast moving consumer goods, automobiles and pharmaceuticals also reported healthy earnings growth of over 15% on average for the April-June period on the back of price hikes and better demand. Positive domestic sentiments were also reflected in record GST collections above Rs. 1.45 lakh crore in October and PMI manufacturing rising to an over 8 year high of 55.7 in November indicating resilience of the recovery.

A Global Recognition of India’s Strengths

Positive sentiment around strong domestic fundamentals was reflected in multiple global brokerages like Goldman Sachs, JP Morgan, Morgan Stanley upgrading their outlook on Indian equities and turning overweight during the year. Brokerages projected robust earnings growth of over 18-20% for Indian companies in FY24. Comments from the US Federal Reserve in November raised hopes of interest rate cuts starting as early as March 2024 if softening inflation trends continue. This boosted information technology stocks that earn significantly from US revenues. Nifty IT index gained around 1.5% following the comments with sector heavyweight TCS adding over 3%.

Rekindling of Foreign Investment Appetite

Foreign investors also turned net buyers in November, adding shares worth Rs 2,901 crore after two months of selling on concerns over aggressive rate hikes by the US Fed. Their return was aided by signs of a peaking US dollar in the third quarter and expectations of foreign capital inflows into Indian shares as inflation concerns receded. The strengthening Indian rupee to over 80 against the dollar and softening US treasury yields improved the attractiveness of emerging markets like India for foreign investors. Majority of foreign selling was also concentrated in a few large cap IT stocks and Reliance Industries.

Domestic Support Powers Ahead

Domestic institutional investors have provided crucial support to the markets. Strong inflows from them of over Rs 1.77 lakh crore so far in 2023 have outpaced net foreign inflows of around Rs 1 lakh crore, despite intermittent selling pressure from offshore investors. Positive domestic liquidity conditions were reflected in declining bank deposit rates to below 6% and buoyant systemic liquidity surplus of over Rs 2 lakh crore. 

This along with record direct tax collections and improved household savings rates helped DIIs increase equity investments. Positive domestic liquidity and consistent buying interest has helped the BSE reach a record market capitalization of Rs 333 lakh crore in November, gaining over Rs 45 lakh crore since January 1.

India’s Growth Story Here to Stay

Strong fundamentals of the Indian economy like rising disposable incomes, growing working population, increasing digitisation, manufacturing sector reforms, production linked incentives schemes and growing infrastructure spending are expected to continue powering the bull run in the near future. 

The IMF projected India’s GDP growth at over 6.5% in 2023 and 2024, making it the fastest growing major economy. Nonetheless, with rising per capita incomes expected to double to over $5,000 by 2027, increasing consumerism, growing investments under the PLI scheme exceeding $30 billion, and strategic manufacturing push under schemes like PLI and China+1, India is well-positioned to achieve higher GDP growth rates of over 7% than most major economies over the next decade. Global institutions like CLSA estimates India’s economy could overtake the US by 2052 to become the second largest economy in the world.

Market Moments with Divam Sharma | Weekly Wrap | Episode 8

In weekly wraps every Saturday at 12 PM, we come live to discuss our favorites – stock markets and the economy. 

This Saturday at 12 PM, our CEO and founder, Mr. Divam Sharma will discuss:

– What’s been up with the markets

– Correction in Indian Markets

– Election Euphoria

We have been seeing election euphoria and some correction in the markets at the same time, and this is a bit confusing to understand but that’s exactly what Divam will talk about this week. Tune in to Episode 8 of Market Moments with Divam Sharma and if you have questions about the markets or our smallcases, submit them here and we’ll answer them during the live. 

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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.