A recent report by the National Stock Exchange (NSE) pointed out that strong corporate earnings and higher-than-expected GDP growth have boosted investor confidence in the Indian stock market.
The report highlights that domestic investors have been the primary drivers of the recent rally, as foreign investors have reduced their participation.
NSE said, “Due to strong corporate earnings and better-than-expected GDP growth, domestic players, both direct and indirect, have become the dominant players in the markets, while foreign interest is waning.” This trend reflects a change in market dynamics, where local investors are coming forward to fill the gap left by foreign investors.
The report also presented an optimistic outlook for Indian equity markets driven by strong growth expectations for the Indian economy. It said FY24 is the third consecutive year of significant economic expansion, with GDP growing at 8.2 per cent. This follows growth rates of 9.7 per cent in FY22 and 7.0 per cent in FY23, establishing a consistent pattern of growth of over 7 per cent annually.
The Reserve Bank of India (RBI) estimates that growth will be 7.2 per cent in the current year, strengthening India's position as the world's fastest-growing large economy.
On the external front, India's balance of payments remains stable, with a current account surplus of US$5.7 billion, the report said. This positive balance has contributed to a favourable economic outlook, which has been further bolstered by S&P's upgrade of India's sovereign rating outlook to 'positive'.
Moreover, the government's fiscal deficit is pegged at 5.6 per cent of GDP in FY24, 20 basis points lower than the revised budget estimate. This improvement is attributed to higher tax collections and effective expenditure rationalisation.
The report also mentions the key macroeconomic events that will be important in the second half of the year. These include the announcement of the Union Budget in July and subsequent policy directions from the Federal Reserve (Fed) and the RBI. The comments and actions of these institutions will be crucial in shaping the economic and market scenario going forward.
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