As anticipation builds for the potential initiation of the Federal Reserve’s interest rate easing cycle in 2024, investor sentiment is expected to remain positive. However, caution is likely to prevail leading up to the general elections.
In the backdrop of a turbulent global economy, the Indian equity market showcased remarkable resilience throughout the calendar year 2023. Both Nifty50 and S&P BSE Sensex, the benchmark indices, achieved record highs, yielding double-digit returns. Consequently, India’s global market capitalization soared to an unprecedented 3.8% in December, as per an analysis conducted by Motilal Oswal Financial Services Ltd.
This reading has consistently surpassed its historical average of 2.7% in recent times, attributing this trend to a confluence of favorable domestic factors and substantial liquidity inflows from foreign and domestic investors. The optimism in the equity market is expected to persist, driven by the possibility of the US Federal Reserve commencing an interest rate easing cycle in 2024. However, there is a potential for investor apprehension leading up to the 2024 general elections. Furthermore, India’s valuation remains relatively high, with a one-year forward price-to-earnings multiple that exceeds those of its Asian counterparts.
