Outlook for the Month of December 2024

Economy Review

The key events in the month were –

1. Domestic Factors –

a) GDP – Real GDP growth in Q2FY25 dropped to 5.4% from 6.7% in Q1FY25 on the back of weak investment growth. Consumption growth picked up in Q2FY25 and was relatively strong at 6%.

b) Infrastructure Output – Infrastructure output growth in October’24 came in at 3.1% Vs 2.4% in September’24.

c) Manufacturing PMI – India’s Manufacturing PMI came in at 56.5 in November’24 Vs 57.5 last month.

d) GST Collection – India’s GST collection in November’24 rose 8.5% yoy to Rs 1.82 tn, reflecting the resilience of the Indian economy.

e) Trade Deficit – Goods trade deficit in October’24 widened to $27.1 bn from $20.8 last month primarily driven by high gold imports.

2. Global Factors –

a) US Presidential Elections – US presidential elections saw a Trump win which led to rally in US equities and strengthening of dollar, with increased risk of tariffs.

b) FOMC – The US Fed has cut the key policy rates by 25bps in the October’24 meet.

c) Eurozone PMI – Eurozone Manufacturing PMI dropped to 45.2 remained below the 50 mark in November’24, reflecting continued deterioration in the region’s manufacturing sector. Services PMI also came in below the 50 mark at 49.2 in November’24.

d) Crude Oil – Brent crude oil prices remain benign at $74/bbl on news of easing geopolitical tensions between Israel-Iran.

Domestic Macro Economic Data

Inflation – The CPI inflation in October’24 spiked to 6.2%, driven by food and core inflation. WPI inflation came in at a 4 month high in October’24 at 2.4% Vs 1.8% in September’24, led by rise in food prices.

Outlook for Equities

Indian equity markets remained volatile in the month of November’24. The Nifty further corrected marginally by 0.3% in November’24 after a 6.2% decline in October’24. Sector-wise IT was the best-performing sector (+6%), followed by consumer durables (+3%). Power and metal sector declined 4.3% and 2.4% respectively. Continued FII outflows, weak Q2FY25 results, urban slowdown and uncertainty on policy shifts with the upcoming Trump administration in US weighed on investor sentiments. However, a land slide victory by the BJP-led Mahayuti alliance in Maharashtra provided some relief to the market.

FOMC in its October’24 meet cut the key policy rates by 25bps. On the domestic front, real GDP growth in Q2FY25 dropped to 5.4% from 6.7% in Q1FY25 on the back of weak investment growth. India’s GSTcollection in November’24 rose 8.5% yoy to Rs 1.82 tn. S&P Global Ratings lowered India’s GDP forecast by 20 bps to 6.7% and 6.8% for FY2026 and FY2027. FIIs sold equities worth $2.2bn during the month of November’24 while DIIs continued to be buyers to the tune of $5.3bn.

We expect Nifty earnings to grow at ~12-13% CAGR over the medium term. While the domestic flows remained very strong throughout the current fiscal, markets have corrected due to slowdown in growth, FII selling and stretched valuations. Post the recent correction, Nifty is currently trading at ~19x FY26e P/E and valuations have turned attractive. Hence, we believe that although the markets will consolidate for some time before the next up move, investors can continue to invest in equities from a medium to long-term perspective.

Outlook for Debt

November month was marked by volatility in the markets as several events unfolded. Real GDP growth for Q2FY25 came in much weaker that market anticipation at 5.4%. Although consumption growth was relatively strong, weak investment growth and broad-based slowdown in manufacturing activities drove the growth numbers lower. Corporate profits were also showing a muted trend for Q2, but the extent of fatigue in numbers confounded most forecasts. Liquidity was another factor which has emerged as an unexpected influence. Banking system liquidity slipped into negative territory in the month of November and Government cash balances dipped into WMA for the first time since April’23. Forex interventions, leakage of currency in circulation as well as spending by Government are the main reasons for this change. FPI flows continued to lack traction for November after a jaded October.

Depreciation in USD INR happened to the extent of 0.60% during November as RBI intervention in spot as well as NDF market stemmed the impact of global events. Post Trump win in the US presidential elections DXY appreciated to the extent of 1.70% in November alone, impact was felt across the globe however INR remained among the best performers in Asia due to actions on the intervention front. This not only had the impact of reducing rupee liquidity from the market it also led to decline of forex reserves from a high of over $700 bn towards $656 bn.


Center’s fiscal deficit in 7MFY25 widened to 47% of FY2025 budgeted estimates as the government released an advance instalment of tax devolution to states in addition to the regular instalment due in October. Capital expenditure growth remained weak. CPI inflation in October’24 spiked to 6.2%, higher than the upper bound of RBI’s tolerance limit, core inflation measured at 3.8%. WPI inflation for October’24 also accelerated to 2.4% while IIP growth in September was at 3.1% with all sectoral and use-based components registering positive growth. Goods trade deficit in October’24 widened to $27.1 bn from $20.8 in September with an expansion in both exports and imports, the deficit increase was driven primarily by high gold imports. Services trade surplus, meanwhile, remained firm at US$17 bn.

The US Federal Reserve cut the Fed funds rate by 25 bps to 4.5%-4.75%, in line with expectations. Fed Chair Powell reiterated the FOMC’s data dependent approach. Regarding the impact of the Donald Trump victory, Chair Powell noted that the election will have no effect on policy decisions in the near term. FOMC minutes from the 6-7th November’24 meeting showed optimism among Federal Reserve officials that inflation is subsiding while the labor market remains robust but indicated that the pace of further interest rate cuts will be gradual. For the December’24 FOMC market expectations for a rate cut moved as low as 50% and currently stand at over 70%, with the thoughts tilted towards 50 bps easing in CY2025. Brent prices remained range bound while gold touched a high of $2786/oz in October end.

Markets await central bank’s policy meetings in December as RBI, FOMC, BOJ and ECB meet in the month. Data on FPI flows, liquidity directions, Dollar index, US NFP data and CPI will be closely watched. New benchmark 10 year Gsec closed at 6.75% on 29th November’24. Yields declined by 5 bps during the month. 10 year Gsec yield is likely to be in a range of 6.60%-6.80% in the near term. Spread of 10 year Gsec with corporate bonds is nearly 50 bps and likely to remain between 45-55 bps.