Setting up for 2025

Welcome back to Beyond Markets, your weekly guide to everything that shapes India’s economy and markets! Markets have been choppy to say the least. This has put the brakes on this year’s euphoria. Meanwhile, India’s GDP growth failed to hit its stride last quarter—was it really a surprise, though? With credit growth slowing, inflation biting, and corporate earnings wobbling, it’s no wonder the “Santa Claus rally” everyone hoped for has been delayed. But could a massive government capex push save the day?

So grab your chai, fasten your seatbelts, and let’s understand the markets together.

Topics: 

1. Will the Santa Claus Effect Cheer Indian Markets?
2. Mutual Funds in November: A Tale of Two Halves
3. 2025 Vision: 12 Stocks Poised for Growth
4. Info-trend

Will the Santa Claus Effect Cheer Indian Markets? 🎅📈

The Indian stock market has been on a rollercoaster ride lately, facing a 10% correction from its peak. While US markets remained buoyant until yesterday's close, India seems to be in the middle of a perfect storm—credit growth slowdown, inflation woes, and weaker-than-expected corporate earnings. Yet, if history has taught us anything, Santa might just bring some cheer as the year wraps up.

The Rough Ride So Far

The latter half of 2024 has been especially turbulent for India:

• Economic Slowdown: GDP growth has cooled, with RBI revising its forecast for the current quarter down to 6.8% (from 7.4%).
• Retail Credit Growth: Slowed from 15-16% to 12-13%, as NBFCs and microfinance institutions hit the brakes to manage liquidity and asset quality.
• Inflation Pressure: October inflation came in at 6.2%, breaching RBI’s upper target range, thanks to food prices.
• Current Account Deficit (CAD): Inched up to 3%, hurt by higher crude oil prices and slowing exports.
• Corporate Results Miss: Q2FY25 profits shrank by 2% (vs. expected double-digit growth). Even excluding the energy sector, revenue growth was slower at 11.6%, denting market sentiment.

Silver Linings Emerging

While these headwinds are real, the tide seems to be turning, offering hope for a better second half:

Festive Cheer & Economic Uptick:

• PMI rose to 57.3 in October, signaling manufacturing expansion.
• GST collections hit ₹1.87 trillion, the second highest ever.
• Auto Sales surged 12.2% during the festive season, indicating improved consumer demand.

Government Capex Boost:

• With most state elections behind us, it’s back to business. The government still has to spend ~₹7 trillion to meet its ₹11.2 trillion capex target for FY25, implying a 52% YoY growth.
• Government cash balances have already dropped by ₹3 trillion between September and November, hinting at an impending capex push.

FIIs, DIIs, and the Santa Claus Effect:

• Foreign Institutional Investors (FIIs) pulled out ~$10 billion in October alone, largely lured by US and China markets. However, a likely pause in US Fed rate hikes could stabilize flows.
• Domestic Institutional Investors (DIIs) remain in steady hands, pouring in $45 billion FYTD, the highest ever for any fiscal year.

With these factors coming into play, market watchers believe India’s rough patch could soon give way to a rebound. If Santa Claus rallies—historically a December phenomenon—play out, Indian equities might get the cheer they deserve.

For now, the focus is clear: Government spending, economic data recovery, and steady domestic inflows are key drivers to watch. If the pieces fall into place, the "Santa Claus Effect" could turn 2024's gloomy end into a festive start to 2025. 🎄

Mutual Funds in November: A Tale of Two Halves

The mutual fund flows in November 2024 reflected a mix of investor caution and resilience, particularly after October's sharp market correction. Despite a notable slowdown in inflows, equity funds continued to see significant traction, showcasing the underlying strength in retail participation.

Key Highlights

A. Equity Inflows Decelerate

Total Inflows: INR 417 billion ($4.9 billion) — down 20% MoM but up 110% YoY.

Core Equity Funds: Saw inflows of INR 359 billion, a 14% decline from October.

Drivers of Weakness:

• Negative sentiment after October's steep fall bruised investor confidence.
• Lower activity in new fund offerings (NFOs), particularly in sectoral and thematic funds.
• A shorter trading month.

B. SIP Flows Hold Steady

• SIP inflows remained robust at INR 253 billion (~$3 billion), consistent with October.
• Total SIP assets under management (AUM) now stand at INR 13.54 trillion ($160 billion), with 102.2 million active SIP accounts.
• However, new SIP registrations dropped from 6.4 million in October to 4.9 million in November, signaling some hesitancy.

C. FII Selling Slows, DIIs Step Up

• Foreign Institutional Investors (FIIs) were net sellers in November, but outflows decelerated sharply: Total outflows: INR 182 billion ($2.2 billion) vs. INR 919 billion ($10.9 billion) in October. Interestingly, FIIs turned net buyers in the second half of November, with inflows of INR 13 billion ($159 million).
• Domestic Institutional Investors (DIIs), on the other hand, remained consistent net buyers, pumping in INR 445 billion ($5.2 billion).

Mutual Fund Sectoral Bets

Indian mutual funds are reshaping their portfolios amid market volatility. Here’s a snapshot of their overweight and underweight positions relative to the BSE200 index:

Where’s the Action?

Top Buying Sectors:

1. E-commerce: Zomato, Swiggy, and Indiamart saw significant buying.
2. Oil & Gas: Heavyweights like Reliance, ONGC, and GAIL gained traction.
3. Consumer: Stocks like Varun Beverages, Britannia, and Marico were top picks.

Top Selling Sectors:

1. Software Services: Stocks such as HCL, TCS, and Mphasis faced selling pressure.
2. Realty: Oberoi Realty and Godrej Properties were among the top names offloaded.

NFO Trends

New Fund Offerings (NFOs) slowed down in November, driving weaker inflows. However, December brings renewed activity with a pipeline of thematic funds like DSP Business Cycle Fund and SBI Quant Fund.

Final Takeaway

While equity flows moderated, SIPs continued to show resilience, signaling retail investor confidence. Mutual funds maintained selective bets in pharma, capital goods, and consumer durables, while staying cautious on private banks and software services. FIIs’ renewed interest in the second half of November and strong DII buying could pave the way for a market recovery in the coming months.

2025 Vision: 12 Stocks Poised for Growth

As we march into 2025, investors are keen to identify which stocks could stand out in an ever-changing market landscape. JM Financial has taken a bottom-up approach to handpick 12 top-performing stocks across sectors. These picks are based on a mix of valuation, growth potential, and near-term numbers — all wrapped up in what they call a Growth at a Relatively Reasonable Price (GARRP) strategy.

Key Highlights:

1. BFSI: Axis Bank and Nippon AMC feature for their strong growth potential in a challenging rate environment. Axis Bank’s leadership continuity and improving liability franchise make it a key pick.
2. Autos: Maruti Suzuki is a standout, leveraging its tech-agnostic approach (hybrids, EVs, and CNG) and Average Selling Price growth through new launches. Samvardhana Motherson benefits from premiumization trends and diversification.
3. Infrastructure & IT: Ahluwalia Contracts boasts a robust order book, while KPIT Technologies leads with its focus on automotive embedded software and structural tailwinds in ER&D spending.
4. Consumer & EMS: Havells India sees steady demand growth, especially in appliances, and Cyient DLM benefits from value-added services and global tailwinds.
5. Healthcare: Metropolis and Global Health (Medanta) are expected to grow steadily, driven by premium positioning and new expansion plans.
6. Media & Power: Zee Entertainment pivots to profitable growth post-merger collapse, while BHEL rides on India’s power capacity expansion plans.

With a well-rounded mix of sectors — from autos to IT to healthcare — this portfolio reflects a careful balance between defensive bets and high-growth opportunities. For investors looking to stay ahead, JM Financial’s picks are worth a closer look.

INFOTREND

Here’s a snapshot of JM Financials' curated list with potential upsides:

That's all for this edition of Beyond Markets by blinkX! Let us know in the comments what you think and what would you like us to cover in the next edition? Have a great week!