December 2024

Global and Market Context

Global financial markets during December 2024 were influenced by evolving macroeconomic conditions, global interest rate expectations, and changing capital flow dynamics across emerging markets. Investors remained attentive to signals from major central banks and the outlook for global economic growth as the year came to a close.

Despite these external uncertainties, India's macroeconomic fundamentals continued to demonstrate resilience. Strong domestic consumption, expanding financial markets, and continued infrastructure investment supported the long-term structural case for Indian equities.

Market Overview

Indian equity markets experienced volatility during December 2024 as investors reassessed corporate earnings expectations and global macroeconomic developments. The Nifty 50 declined approximately 2.02% during the month, while the broader Nifty 500 index fell around 1.37%.

Mid-cap and small-cap segments remained relatively stable during the month, reflecting continued domestic participation despite fluctuations in large-cap benchmarks. Sector-specific pressures were visible in metals and automobile stocks, which contributed to broader market volatility.

Macroeconomic Developments

Several macroeconomic indicators shaped investor sentiment during the month. The Reserve Bank of India revised its GDP growth forecast for fiscal year 2024–25 to approximately 6.6%, down from an earlier estimate of 7.2%, reflecting weaker-than-expected economic activity in the second quarter.

Inflation dynamics remained relatively stable. Retail inflation moderated to approximately 5.4% during FY2024, compared with 6.7% in FY2023, reflecting the impact of policy measures and supply-side interventions implemented by the central bank.

Sector and Economic Indicators

Economic indicators presented a mixed picture across sectors. The services sector concluded the year on a strong note, with the Purchasing Managers' Index rising to 59.3 in December, indicating robust demand and continued expansion in services activity.

The manufacturing sector also demonstrated improvement, with the manufacturing PMI rising to approximately 57.4, suggesting stronger production activity and improving demand conditions.

However, electricity generation growth slowed to its weakest pace since the COVID-19 pandemic, indicating potential moderation in certain segments of industrial activity.

Currency and Market Internals

Currency markets also reflected global macroeconomic pressures. The Indian rupee depreciated for the seventh consecutive year, closing 2024 near 85.615 per U.S. dollar. The roughly 2.8% annual decline was driven by a strengthening U.S. dollar, widening trade deficits, and periodic foreign capital outflows.

Despite these pressures, domestic liquidity conditions and strong participation from institutional and retail investors helped maintain overall stability in equity markets.

Sector Allocation and Stock Selection

Portfolio positioning continues to emphasize companies with strong balance sheets, sustainable earnings growth, and robust return on capital. Large-cap equities and high-quality companies remain important portfolio allocations as investors navigate an environment characterized by valuation dispersion and evolving macroeconomic conditions.

Stock selection remains focused on identifying businesses with durable competitive advantages and resilient operational performance. In periods where market volatility increases, disciplined security selection becomes an increasingly important driver of long-term portfolio returns.

Outlook

Looking ahead to 2025, Indian equity markets appear positioned to navigate a dynamic global environment supported by resilient domestic fundamentals. Corporate performance will remain a central driver of market outcomes. Valuation premiums for high-quality companies are likely to remain contingent on the delivery of consistent earnings growth and operational execution.

In this environment, companies that fail to meet expectations may face disproportionately negative market reactions, highlighting the increasing importance of earnings resilience and strong business fundamentals.

Closing Perspective

While global macroeconomic uncertainty may continue to influence short-term market sentiment, India's structural growth drivers—including strong domestic demand, ongoing infrastructure investment, and continued financial market development—remain intact. Our investment approach remains centred on disciplined sector allocation and rigorous stock selection aimed at identifying fundamentally strong companies capable of delivering sustainable long-term returns.

Major Indices – December 2024