Ahmedabad Investment：Citi： ＂Crazy＂ in the Indian stock market may shine in the fog

Original title: Citi Observatory 2024 India: The stock market "crazy" may depend on this resultAhmedabad Investment

India has become the "darling" of this year's global investment. Economic growth is better than expected. The stock market has rose "in a bamboo", with a market value of more than $ 4 trillion. Nifty 50 has risen nearly 18%so far this year, towards an unprecedented eight -year rising.

In 2024, can India's economy holding the "love" of the market, can the Indian stock market continue to rise?

In early December, Citi ’s Indian economic team, stock and fixed income strategy team issued a report“ India 2024 Outlook -Shining in the Misty Election ”, and looked forward to the 2024 Indian asset trend:

Fundamentals: With the decline of adverse factors such as global interest rates, the appreciation of the US dollar, and the rise in oil prices, the Indian economy will continue to maintain a strong growth. India's GDP may reach 6.7%in fiscal year in 2024Simla Investment. Affected by the slowdown of the global economy 2025, the fiscal year will slow down.To 6.2%.

Indian stock market: In 2024, we expect to have a strong prospect of profit growth and maintain a constructive view of the Indian market.The target price of Nifty in December 2024 was 22,500 points, and the long -term price -earnings ratio was 19 times, which is about 5%of the current room.Although foreign capital flows into the Indian stock market this year, the Citiban Index shows that India's extent in the investment portfolio in investor emerging market has declined.

Indian bond markets and rupees: global interest rates may decline, and the US economic recession is imminent.Indian policies are likely to protect the impact of Indian assets from risk aversion/deleveraging against wind and start to gradually reduce interest rate cuts.We expect yields to fall down, while India's rupees will remain stable.

It is worth mentioning that the year of 2024 is the Indian election. The results of the election will affect the trend of various assets such as printing shares.Political continuity has less risks to the market.

Citi pointed out that with the decline of unfavorable factors such as global bond yields, the appreciation of the US dollar, and the rise in oil prices, India will continue to maintain a strong performance.The ease of inflation will provide space for loose monetary policy.However, as the external and domestic demand environments have softened cyclical, the economic growth rate of fiscal year in 2025 will slow down.

Although facing external adverse factors, India's economic growth in 2023 exceeded expectations. The risks brought by the results of the national election in 2024 seemed to be quite low, which re -ignited the hope of improving capital flow and the recovery of private capital expenditure.The global anti -winds that are emerging may reduce the global economic growth rate of 70 basis points to 1.9%, and at the same time, the US economy is about to fall into recession.

For India, we expect that its GDP growth rate will slowly slow from 6.7%in fiscal 2024 to 6.2%of fiscal year (April 1, 2024 to March 31, 2025).It is still hopeful for the recovery of capital expenditure.At the same time, India may reduce the fiscal deficit target of fiscal 2025 to 5.6%, but 4.5%of the mid -term target is still challenging.

The general relief of inflation pressure and the decreased pressure on the US dollar will allow India to gradually reduce the policy interest rates from mid -2024. The Indian Bank may gradually relax the monetary policy and conduct interest rate cuts for the first time in June 24.If the overall CPI in fiscal 2025 decreases to 4.5%, it should be enough to let the Bank of India start 50 basis points from interest rate cuts from mid -2024.

Regarding the impact of the general election on the economy, Citi pointed out:

The ruling party of the current Prime Minister Modi in the recently -ended state election has performed strongly, increasing the possibility of winning in the 2024 election.This has strengthened the market's expectations for policy continuity, and it may also help the stock market's positive emotions and investment growth of private sector.

For the Indian stock market, Citi pointed out that it is expected to have a strong prospect for profit growth in 2024, while maintaining a constructive view of the Indian market.The Nifty Index's target price in December 2024 was 22,500 points, and the long -term price -earnings ratio was 19 times, which is about 5%of the current increase space.

From the perspective of relative and absolute valuations, Citi pointed out that the valuation of the Indian stock market is higher than the long -term average, but considering the relatively growing elasticity and challenges of other countries in emerging markets, this is reasonable.Citi/Consensus expects to increase the income growth of the Nifty Index 2024 in fiscal 2024, and the growth rate per share is expected to be 14%/15%in fiscal 2025.

From the perspective of the subdivision industry, Citi has remained unchanged on the positions of various industries:

Focus on superpatients: state -owned public utilities/national defense, industry and bank/insurance; key low -allocation: consumer goods, IT services, metal.

Large Curder VS Middle Cylinder Stock: The first choice of large -cap stocks instead of mid -cap shares.However, funds have begun to flow to small and medium -sized enterprises, and this situation may continue.

From the perspective of capital flow, India's domestic capital inflow remains strong in 2023, and the rate of capital inflows of regular investment plans (SIP) increased after a slowdown in 2022.In the first half of 2023, foreign capital inflow was approximately $ 14 billion, compared with about $ 17 billion in 2022.Citi pointed out:

In the past, we have emphasized that a large amount of domestic funds in the country have reduced the volatility of the Indian market and led to the revaluation of valuations in the past ten years.

From March to July 2023, about 35 billion US dollars of funds flowed into emerging markets, India attracted more than 50%; and between August and October 2023, $ 50 billion in funds out of emerging markets, of which India accounted for accountingAbout 6%.This shows that foreign investment has a relative preference for India.

Although India's configuration in emerging market funds has increased, according to data from our regional teams, India's super -matching situation in emerging market portfolios has gradually decreased, and it is close to neutrality.At the same time, India's weight in the benchmark index has risen further.

Looking forward to the trend of the Indian market next year, Citi pointed out that there are five aspects of the following five aspects to pay attention:

a) Consumption: In the short term, it may continue to be K -shaped growth, and it is a widespread basis for consumption growth.

b) Capital expenditure: In view of the strong asset liability statement, cash flow, and favorable policy environment, public capital expenditures will maintain a growth momentum, and private capital expenditures should be gradually improved;

c) Election: The results of the election will receive close attention, and the results of the state election will reduce the risk of the tail that occurs accidentally;

d) Credit growth: It is expected to slow down in the future, and it is necessary to pay close attention to the trend of non -guaranteed loans.

e) Fund flow: India is in a favorable position in emerging markets, and the inflow of domestic funds is surprising.

Regarding Indian Treasury bonds and foreign exchange, Citi pointed out that as the Indian election began and included in the key bond index, Indian government bond yields will eventually fall, and the Indian rupee may remain stable.

The global nominal yield may slow, and the US economic recession is imminent.The enhancement of Indian policy and external buffer capabilities will largely protect the effects of Indian assets from risk shelter/deleveraging/deleveraging. In addition, India may start to gradually relax the policy.It may be relatively stable.

Furthermore, Citi pointed out that the tightening fiscal policy and loose monetary policy provide conditions for the decline in yields.

Foreign direct investment inflows with more than $ 25 billion can help decrease yields. By the end of the year, India's 10 -year Treasury yield may approach 6.5%.

The Indian rupee may remain stable, and Citi pointed out:

In the past few months, the market forces and the Indian central bank have limited the exchange rate to a ultra -narrow range. Possible remedy is to prevent the conductive inflation caused by the occasional surge of commodities, and to prevent enterprises that have unscrusal foreign debt.Financial risks.However, the more typical and structural factors to suppress currency fluctuations are the transformation of the Indian central bank's preference for the accumulation of the US dollar, and the rupees that may be more inclined to depreciate.

Citi reminds that there are two important events that may affect the trend of rupees:

1) The inflow of funds after incorporating the key bond index: It is expected that the Bank of India may use these funds to inflow to enhance foreign exchange reserves, especially considering the overall policy to be skeptical of fixed income inflows.This may mean that when funds flow, India may take measures to enhance foreign exchange reserves to stabilize the rupee exchange rate.

2) The results of the general election: If the policy stability during the election period will cause the rupee to rebound a brief, which may reflect the market's optimistic attitude towards policy stability.Considering this situation, we will explore the relative value trading opportunities of the Indian rupee and a basket of currencies (such as Xinyuan).