Market Outlook: From policy implications to earnings, key trends to watch out for in H2 2024

Indian stock indices — Sensex and Nifty 50 — delivered remarkable gains in the first half of 2024. Nifty 50 surged 10.5 per cent to a record high of 24,174, while Sensex surged 9.4 per cent to a peak of 79,671.58. Despite significant volatility due to domestic and global factors, these milestones underline the market’s resilience and investor optimism amid challenging conditions.

Going forward, market experts expect the bullish momentum to continue. The second half of fiscal year 2025 presents a dynamic and multi-faceted investment environment, influenced by a mix of domestic and global factors.

Experts emphasize the importance of monitoring fiscal policies, inflation trends and government reforms, as well as the impact of the monsoon season and international economic conditions. With key events like the Union Budget, state elections and potential policy changes by the US Federal Reserve on the cards, investors should remain vigilant and adaptive to navigate the changing market landscape. The collective insights suggest a cautious yet optimistic view, with opportunities across sectors including FMCG, private banking, renewable energy and infrastructure. As always, a well-informed and strategic approach will be key to capitalizing on the market’s potential in the second half of FY25.

As we enter the second half of fiscal year 2025, market experts have identified key macro trends and sector events that are likely to shape the investment landscape. Let’s take a look at the insights of prominent financial analysts and fund managers on what investors should be looking out for in the coming months.

Macroeconomic trends worth paying attention to

Hemant Kanawala, Senior Executive Vice President, Investments, Kotak Mahindra Life Insurancehighlights several key macroeconomic trends. Fiscal consolidation measures, inflation rates, monetary policy decisions, and the government’s economic reform policies versus populist measures will have a significant impact on economic stability and growth prospects. In addition, the progress of the monsoon season and the US Federal Reserve’s policies are key factors that will shape investment sentiment.

Aditya Khemka, Fund Manager at Incred AMChighlights the recovery in urban and rural consumption as key trends to watch out for. Expects food inflation to pick up in the near future, with the budget likely to provide relief to the poor through measures such as loan waivers and direct benefit transfers.

Budget and Policy Implications

Diwakar Rana, PMS Fund Manager at Prudent Equityunderlines the importance of the upcoming budget. The government released a decent interim budget ahead of the elections, and investors are eager to see if this continuity continues. The budget will set the direction of the government’s priorities, affecting various sectors and potentially driving market movements.

Sumit Jain, Deputy CIO at ASK Investment Managersalso underlines the importance of the Union Budget. He further expects it to spell out the government’s priorities and believes that an above-normal monsoon could ease food inflation pressures, providing some scope for monetary policy adjustments. Accordingly, private consumption is expected to pick up in fiscal 2025, contributing to broad-based growth.

Sector insights and market dynamics

Sonam Srivastava, Founder and Fund Manager at Wright Researchidentifies several key trends for H2 FY25. Monetary policy by the US Federal Reserve and the Reserve Bank of India (RBI) will be closely watched as interest rate decisions could significantly impact market sentiment. The Indian budget, due in July, could lead to a sector rotation, with corporate profit growth remaining a key factor. Srivastava expects strong performance from the FMCG sector and private banks, while the energy transition theme is also gaining traction. Geopolitical tensions and performance of other global markets will also impact the Indian market.

Apurva Sheth, Head of Market Outlook and Research at SAMCO Securitiesexpects a bountiful H2 CY24. Key events include the onset of monsoon, Union Budget, state elections in various states and the US elections. These factors could introduce volatility and impact sectors like FMCG, rural-focused stocks and consumption-related stocks. The US Federal Reserve’s decision on interest rate cuts will also be key. Markets started the year expecting five rate cuts by the US Federal Reserve in 2024, which has come down to three and now the chances of even one rate cut seem low. So, all these events are known and markets will be looking out for in H2 CY24, Sheth added.

Corporate Profits and Market Performance

Hemang Kapasi, Head of Action at Sanctum Wealthnotes that post general elections, the focus is on corporate earnings. FY24 ended with a stellar performance across most sectors, except IT and consumer staples. BSE500 earnings growth of 30% was supported by margin expansion and growth in operating cash flow and free cash flow ahead of volume growth. A key trend to watch is whether volume growth can take centre stage as margin tailwinds have been exhausted. Without a significant revenue growth, PAT growth would look muted this year. From a policy perspective, addressing rural issues could also shift the government’s priorities from capex allocation to rural allocation.

Ravi Singh, Vice President, Retail Research, Religare Brokingbelieves that despite the recent rally, the market tone is likely to remain positive, but advises caution against being overly bullish. Some profits could come from the recent rally in the indices.

Growth opportunities in key sectors

Trivesh D, COO at Tradejiniindicates strong growth prospects in infrastructure, railways, renewables and IT. Investments in renewables are poised for a rapid increase, supported by global sustainability initiatives. Thematic investments focusing on sectors aligned with long-term structural changes are gaining momentum. Government support is expected to boost infrastructure and railways, driving further expansion. Strong performance of Nifty 50 in H1FY24 underlines positive outlook for the rest of the fiscal year.

From fiscal policy and inflation rates to government reforms and global economic influence, these factors will play a key role in determining economic stability, growth prospects and investment sentiment.

Disclaimer: The views and recommendations presented above are those of the individual analysts or brokerage firms and not Mint. We recommend that investors consult certified experts before making any investment decisions.