Market Performance Overview: November 2024:
November 2024 was marked by heightened market fluctuations, as the Nifty 50 grappled with a mix of domestic and global challenges. Weak second-quarter corporate earnings, rich valuations, and external headwinds like the U.S. Presidential elections and India’s Assembly polls weighed heavily on sentiment. The index slipped to a 5-month low during the month and moved within a tighter range of 1,274 points, compared to 1,834 points in October. Market volatility climbed to 15 from the previous month’s 12, reflecting growing uncertainty. Despite these pressures, the Nifty 50 posted a minor decline of just 0.31%, the smallest monthly loss of the year. Among sectors, IT stocks outperformed, advancing 6.8% as optimism around Donald Trump’s election victory boosted hopes for favorable policy changes that could benefit Indian tech firms reliant on U.S. revenue.
Foreign institutional investors (FIIs) maintained their selling streak, withdrawing ₹46,000 crore from Indian equities in November. Although the outflows remained substantial, they were significantly lower than October’s record of ₹1.14 lakh crore. A brief period of FII buying from November 23 to 25, amounting to ₹11,112 crore, offered temporary relief before selling resumed, with large withdrawals of ₹11,756 crore and ₹4,383 crore on consecutive days. In contrast, domestic institutional investors (DIIs) provided critical support by purchasing ₹44,000 crore worth of equities during the month. Their strong participation helped offset some of the selling pressure from foreign investors, preventing steeper losses and lending stability to the market amid a challenging environment.
Sectoral performance
Across Indian equities, November showcased a mixed sectoral performance amid heightened market volatility. IT, realty, and PSU banking emerged as the top-performing sectors, each recording gains exceeding 6%, driven by sector-specific tailwinds and improved sentiment. On the other hand, FMCG, energy, pharma, and commodities underperformed, facing challenges from subdued consumer demand, rising input costs, and broader market pressures. In the following sections, we provide a more comprehensive examination and detailed insights of some major sectors:
Auto:
The automotive sector in November 2024 exhibited a mixed performance across various segments, reflecting differing demand dynamics and market conditions.
The passenger vehicle segment saw a modest 6-7% year-on-year (YoY) growth in domestic sales, driven by strong SUV volumes. However, month-on-month (MoM) sales declined by 7-9% due to seasonal adjustments post-festive season. Entry-level car sales faced slight pressure, while the SUV segment demonstrated robust YoY growth of around 20%. Overall, domestic PV sales remained resilient, with select sub-segments showing significant gains.
The commercial vehicle segment reported flat YoY sales but experienced a sharp 20% MoM decline, primarily due to weaker demand for heavy trucks. On the other hand, passenger carriers in the CV space posted substantial growth, with YoY gains of over 30% in some categories. Moving forward, low single-digit growth is anticipated for FY25, driven by gradual improvements in fleet utilization and replacement demand in the medium and heavy commercial vehicle (MHCV) segment.
Two-wheeler sales presented a mixed picture, with domestic volumes remaining flat YoY while exports surged by 32%. The festive season provided temporary support to domestic sales, which were further bolstered by rising rural demand and new model launches. Dispatches grew 3% YoY overall, but individual performance across manufacturers varied.
The three-wheeler segment experienced a mixed trend, with notable YoY declines in domestic dispatches for some manufacturers, while others achieved strong growth. This divergence highlights uneven demand recovery in this segment.
Tractor sales remained steady YoY in November but saw a steep MoM decline of approximately 50% due to seasonal factors. A recovery in demand is anticipated in the latter half of FY25, supported by favorable agricultural conditions, including above-average monsoon rainfall, improved reservoir levels, and a promising Rabi harvest.
The automotive industry continues to navigate a varied recovery trajectory. While certain segments, such as SUVs and passenger carriers, demonstrate strong growth potential, challenges persist in other areas, such as heavy trucks and entry-level cars. A combination of rural demand, agricultural resilience, and selective replacement cycles is expected to shape the sector’s performance in the coming months..
Chemicals:
The chemicals sector experienced a widespread decline in prices on a month-on-month basis in November 2024, continuing to adjust from the peak levels witnessed during the pandemic. Most chemicals exhibited a downward trend, with acetone prices registering the steepest fall at 10%. Other significant declines included TDI and IPA, which dropped by 9% and 8%, respectively, while MEG, acetonitrile, and acetic acid saw reductions ranging from 4% to 8%. Heavy soda ash was the sole exception, maintaining stable pricing during the month.
This broad-based price correction highlights the sector’s shift toward normalization amid easing supply-demand imbalances. While domestic demand remained steady, heightened competition from Chinese manufacturers has intensified pricing pressures, particularly within the commodity chemicals segment.
In the near term, the commodity chemicals segment is expected to remain range-bound, supported by decent domestic consumption. However, in the long run, companies that focus on developing value-added products and advancing up the value chain with enhanced scale and complexity are likely to outperform. Such strategic shifts provide better insulation from competitive pressures and pave the way for sustained growth compared to a reliance on commodity-focused operations.
The chemicals industry’s trajectory will largely hinge on balancing stable domestic demand with the global competitive landscape, particularly the influence of pricing from Chinese markets.
Metals:
In November 2024, Indian steel prices saw a slight dip of 0.6% month-on-month (MoM), reaching Rs 47,700 per tonne, while Chinese steel prices fell more sharply by 4.9% MoM to $485 per tonne. Coking coal prices remained stable at $170 per tonne, owing to weaker demand in global markets. Domestic steel production in India rose by 6.8% YoY, reaching 12.5 million tonnes in October 2024, while Chinese steel production also saw an increase of 6.2% MoM, reaching 82 million tonnes. However, global steel production declined by 5.9% MoM, totalling 152 million tonnes.
Chinese steel exports continued to surge, rising by 10.1% MoM and 40.8% YoY to 11.2 million tonnes, marking the highest level in nine years. This uptick in exports reflects weak domestic demand in China, despite multiple stimulus packages. The continued elevated exports from China remain a concern for the global steel sector, putting pressure on domestic steel prices.
In the input markets, domestic iron ore prices fell by 2% MoM to Rs 7,250 per tonne, while international prices rose by 1.8% to $97 per tonne. Manganese prices saw a decline of 3% MoM, dropping to Rs 15,560 per tonne.
The non-ferrous metals segment also experienced a correction, with aluminium prices slipping by 0.6% MoM to $2,577 per tonne. Copper prices fell more sharply by 5.2% MoM to $9,011 per tonne, primarily driven by disappointing demand expectations in China. Zinc prices dropped by 2.6% MoM to $3,109 per tonne, reflecting weak demand linked to the sluggish real estate market in China.
Looking ahead, India’s steel sector could benefit from lower input prices, with domestic iron ore prices dropping and stable coking coal prices potentially improving margins for Indian steelmakers in the coming quarters. Furthermore, the Indian Steel Ministry’s proposal for a 25% duty on certain steel imports could provide some support for domestic prices. Despite firm domestic demand projections of 8%-9% growth in FY25, the rich valuations of steel companies limit potential upside, leading to a neutral outlook for the sector in the near term.
Hotels:
The hotels sector continued its strong performance in November 2024, with year-on-year (YoY) growth in average daily rate (ADR) across both lower and higher price bands. The ADR saw an impressive increase of 17.6% in the lower price band and 27.3% in the higher price band compared to November 2023. Among the key domestic markets, Bengaluru and Goa stood out with a significant uptrend in hotel prices, both seeing a growth of over 30% YoY due to sustained demand. Other markets also experienced healthy double-digit ADR growth, reflecting overall strong performance across the sector.
The addition of new hotels continued at a healthy pace, with organized players focusing on expanding their presence through management contracts and licensing agreements, rather than ownership, to maintain financial flexibility. This strategy has enabled them to capitalize on the growing demand in India’s hospitality industry. The rapid expansion of India’s luxury hospitality sector, driven by rising disposable incomes, changing traveler preferences, and infrastructure improvements, has resulted in a surge in demand for premium experiences. This trend is evident in both tier-one and tier-two cities, attracting both domestic and international hotel brands.
The sector maintained its growth trajectory through Q3 2024, registering a 10.8% increase in revenue per available room (RevPAR) driven by higher ADRs. On a quarter-on-quarter (QoQ) basis, the sector continued to perform well, marking a 2% increase in RevPAR from Q2 2024 to Q3 2024. This reflects the sector’s consistent upward movement as it benefits from strong demand and a favorable market environment.
Important events & updates
A few important events of the last month and upcoming ones are as below:
- India’s GDP grew by 5.4% YoY in the September 2024 quarter, slowing from 6.7% in the previous quarter and falling short of the 6.5% market expectation, marking the weakest growth since December 2022.
- India’s infrastructure output rose by 3.1% YoY in October 2024, up from 2% in September, recording the highest growth in three months.
- The HSBC India Manufacturing PMI fell to 56.5 in November 2024, down from 57.3 and October’s 57.5, indicating slower growth in new business and production amid strong demand, competition, and price pressures.
- The HSBC India Services PMI was revised to 58.4 in November 2024, below the initial 59.2 and October’s 58.5, marking the 40th straight month of growth, driven by strong demand and new business gains.
- The HSBC India Composite PMI was 58.6 in November 2024, below the flash estimate of 59.5 and October’s 59.1, marking the 40th consecutive month of expansion in private sector activity.
- The RBI kept the repo rate at 6.5% for the 11th straight meeting in December and cut the CRR by 50bps to 4%, its first reduction since April 2020, to boost liquidity ahead of tax outflows.
Fundamental outlook:
India’s economic outlook remains positive, driven by several favorable structural factors that position the country well for long-term growth despite short-term challenges. The stable political landscape, ongoing infrastructure development, and an emphasis on capital expenditure (Capex) are key drivers of credit growth, which in turn supports Indian equities. As a result, the equity market is expected to deliver double-digit returns over the next 2-3 years, supported by robust earnings growth. Although GDP growth in Q2FY25 fell below expectations at 5.4%, this slowdown can be attributed to temporary factors such as the Loksabha elections, widespread flooding, and reduced government spending. Despite this, a strong recovery in earnings is anticipated in the second half of FY25, driven by factors such as increased government Capex, post-monsoon activities, an increase in wedding-related spending, and an expected rural demand pickup. The Reserve Bank of India’s (RBI) decision to reduce the Cash Reserve Ratio (CRR) and take measures to ensure liquidity further strengthens the economy’s growth prospects, as it mitigates any liquidity concerns.
Looking ahead, the Indian economy is expected to sustain its growth momentum. The RBI has revised its real GDP growth forecast for FY25 down to 6.6% from 7.2%, but the outlook for the second half of the year remains strong, with projected growth of 6.8% in Q3FY25 and 7.2% in Q4FY25. This growth is anticipated to be driven by government spending, a recovery in rural demand, and strong external trade. Inflation, which had been a concern earlier in FY25, is projected to moderate, with the RBI expecting it to return to 4% by Q2FY26. This will be supported by easing food prices as the new crop season arrives and stable oil prices. The RBI’s CRR cut will inject Rs. 1.16 trillion into the banking system, providing ample liquidity. Moreover, measures such as increasing the ceiling on FCNR deposits will help boost capital inflows, further supporting the economy. With these supportive factors in place, India’s growth trajectory remains optimistic, underpinned by both domestic and global drivers.
Technical outlook.
India’s macroeconomic indicators continue to reflect a strong economic foundation. The infrastructure sector registered a 3.1% year-on-year growth in October 2024, the highest in three months. The manufacturing sector remains strong, with the Manufacturing PMI for November 2024 at 56.5, indicating solid growth in production and new business despite some moderation. The Services PMI was revised to 58.4, maintaining healthy expansion in the services sector, while the Composite PMI at 58.6 further supports the view of continued growth in the private sector. On inflation, the RBI has noted risks stemming from food and core inflation but anticipates moderation in the coming months, supported by a favorable base effect and stable oil prices. The combination of improving liquidity, strong infrastructure activity, and a resilient manufacturing and services sector signals continued growth for India.
Outlook for the Global Market
US Market:
The US market continues to attract record levels of investment, buoyed by the country’s strong economic performance. With most economists projecting continued growth into 2025, the US has shown impressive recovery from high inflation, setting a benchmark for other developed nations. Positive credit rating trends are expected to persist, with debt defaults likely to decrease in 2025. The incoming Trump administration’s promise of deregulation, particularly in the financial and energy sectors, adds to the positive sentiment, further driving investor confidence. However, uncertainty remains due to potential sweeping policy changes, particularly around tariffs and trade relations with key partners like China, Mexico, and Canada. In November, the “Trump trade” dominated markets, with the US Dollar strengthening on expectations of tariffs, while Bitcoin surged amid talks of a crypto reserve. The stock market also rallied on hopes for tax cuts, though tensions in Ukraine and trade frictions with China created volatility.
The US economy is projected to grow at 2.3% in 2024, with continued expansion expected in 2025, supported by strong consumer spending and corporate investment. Inflation is expected to rise to 2.9% by year-end due to challenging year-on-year comparisons but will ease to 2.5% by the end of 2025. The labor market is expected to show signs of cooling, with the unemployment rate rising slightly to mid-4% in 2025. The Federal Reserve is anticipated to cut short-term rates to 4.25%-4.5% in December 2024, with further reductions in 2025. However, aggressive rate cuts are unlikely due to potential inflationary pressures, especially if tariffs are enacted. While the US economy remains resilient, several risks could weigh on market sentiment. Tariff increases could reignite inflation and strain credit markets, particularly for lower-rated borrowers. Additionally, geopolitical tensions and climate-related risks to physical assets could further complicate the outlook.
For investors, sectors poised to benefit from deregulation, such as financials and energy, offer promising opportunities. However, with the threat of higher tariffs looming, especially on China and other trading partners, short-term caution may be required in consumer goods and technology stocks. Fixed-income markets could see gains in the short term due to expected rate cuts, but rising inflation and geopolitical risks could dampen returns over time.
The recommendation for our investors is cautiously optimistic. While the US economy shows strong growth potential, careful attention to policy changes, geopolitical risks, and sector-specific dynamics will be essential for navigating the market in 2025.
Outlook for Gold
Gold prices in India have surged due to geopolitical risks, global uncertainties, and expectations of policy easing. Despite recent volatility, gold ended November 2024 near Rs 78,000 per 10 grams for 24K gold, marking a 22% increase for both 22K and 24K gold since the start of the year. The Reserve Bank of India’s stance on interest rates, along with expectations of further rate cuts by the US Federal Reserve, has also supported gold prices. Geopolitical tensions and potential tariff threats from the US continue to drive demand for gold as a safe-haven asset.
What should Investors do?
Given the current economic environment, we recommend a cautious approach at this stage, advising investors to avoid bulk investments. While the medium-to-long-term outlook for the Indian economy remains optimistic, driven by favorable structural factors, we are seeing signs of short-term volatility that could impact market performance.
India’s economic fundamentals continue to present a positive long-term growth story. The country’s stable political regime, ongoing capital expenditure (Capex) projects, and improving credit growth are expected to drive sustained earnings growth over the next 2-3 years. Despite this, recent economic data, such as the Q2FY25 GDP growth falling short of expectations at 5.4%, signals some short-term challenges. The RBI’s downward revision of its FY25 GDP growth forecast to 6.6% further reflects the economic slowdown in the first half of the year, though recovery is anticipated in the latter half.
Additionally, inflation concerns have resurfaced, with the RBI revising its inflation forecast for FY25 upward to 4.8%, compared to the earlier estimate of 4.5%. The current inflationary pressures, along with the recent GDP miss, indicate that while the economy is showing signs of recovery, it will take time for growth to fully stabilize. This has prompted the RBI to take a more cautious stance, keeping the repo rate unchanged while providing liquidity support through a 50bps CRR cut.
Furthermore, India’s VIX is currently below its long-term average, indicating that the market is in a neutral zone, neither too volatile nor overly optimistic. This neutral positioning suggests potential market fluctuations in the short run, making it an opportune time to exercise caution.Given these factors—economic slowdown concerns, upward inflation revision, and market volatility—we recommend that investors adopt a more measured approach in the current environment.
Disclaimer:
This article should not be construed as investment advice, please consult your Investment Adviser before making any sound investment decision.
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