Jul 12, 2024

Economic Growth and Fiscal Stability: India's Ascendant Trajectory

India's economy exhibits strong growth and prudent fiscal management, distinguishing itself amidst global uncertainties. Achieving a 7% GDP growth, the country demonstrates resilience and dynamism, outpacing global counterparts. Fiscal discipline is maintained with a deficit target of 5.1% of GDP, ensuring sustainable financial practices. The low current account deficit signifies external sector robustness, contributing to economic stability. Despite foreign divestments, the NIFTY index's resilience, supported by robust domestic inflows, reflects investor confidence.

India's economy is on an impressive upward trajectory, underpinned by robust growth and prudent fiscal management. As we navigate through the fiscal year, the nation stands out as a beacon of economic momentum in a landscape marked by global uncertainties.

GDP Growth: A Testament to Economic Vitality

India's journey towards achieving a commendable 7% GDP growth is a testament to its vibrant economy. This remarkable growth rate notonly highlights the country's resilience but also sets it apart from its global counterparts, showcasing the dynamism and potential of the Indian market.

Fiscal Discipline Amidst Growth In a balancing act of growth and governance, India has meticulously set its fiscal deficit target at 5.1% of GDP. This strategic stance reflects a commitment to fiscal discipline, ensuring that expansive growth strategies are complemented by sustainable financial practices.

Current Account Stability: A Marker of External Sector Robustness

With the Current Account Deficit at record lows, India's external sector exudes strength and stability. This robustness is pivotal in fortifying the nation's economic foundations, contributing significantly to its overall stability and resilience.

Stock Market Dynamics and Investment Flows: A Mirror to Investor Confidence

NIFTY's Resilient Performance Despite foreign institutional investors (FIIs) divesting Rs 316 billion worth of stocks, the NIFTY index has shown remarkable resilience. This is balanced by robust domestic inflows amounting to Rs 441 billion, underscoring the unwavering confidence of local investors in the Indian market's potential.

Sectoral Growth: The Vanguard of Progress

The banking, capital goods, hospitals, pharmaceuticals, and new energy sectors stand at the forefront of India's growth story. With the NIFTY trading at a 3.4%discount to its 15-year average and an anticipated EPS CAGR of 16.7% over FY24-26, the stage is set for unprecedented growth in these key industries.

Rabi Sowing Season: Reflecting Agricultural Resilience

The Rabi sowing season, despite a slow start due to climatic adversities, has remarkably bounced back. The dedication to wheat, coarse cereals, and oilseeds has seen a positive turnaround, with the total acreage reaching approximately 709.3 lakh hectares, mirroring last year's figures and showcasing agricultural resilience.

Diverse Crop Acreage Dynamics

  • Wheat: The 2.4% YoY growth in wheat acreage to 341.6 lakh hectares highlights the sector's robust response to favorable market conditions and policy support.

  • Pulses: The reduction in pulses acreage by 6.1% to 160.1 lakh hectares underscores the challenges faced in cultivating key varieties, necessitating strategic intervention.

  • Coarse Cereals: Sowing of coarse cereals registered a positive trend, with the acreage increasing by 3.8% YoY to 57.4 lakh hectares.

  • Oilseeds: The area under oilseed cultivation rose by 1.2% YoY to 111.0 lakh hectares. This growth was significantly influenced by a 2.5% increase in the sowing of mustard and rapeseed. The uptick in these crops can be attributed to rising demand and governmental efforts to boost oilseed production domestically.

NIFTY 50 Valuation: Projecting Market Potentials

Projecting forward, we value NIFTY at a 15-year average P/E of 18.9x with an FY25 EPS of 1321, setting a 12-month target of 24,966.

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Disclaimer:

Mool Capital Limited is a SEBI Registered Research Analyst having registration no. INH000012449. This report has been prepared by Mool Capital Pvt. Ltd. and is solely for information of the recipient only. The report must not be used as a singular basis of any investment decision. The views herein are of a general nature and do not consider the risk appetite or the particular circumstances of an individual investor; readers are requested to take professional advice before investing. This document is not, and should not, be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report should not be construed as an invitation or solicitation to do business with Mool Capital. Mool Capital and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.