GDP growth, inflation among key triggers that may drive mkts in Samvat 2081

While GDP growth may have moderated in Q2FY25, inflation might not weigh so heavily on markets in Samvat 2081 say analysts. Here are some key insights on what may drive markets going forward

Samvat 2081 outlook: Amid heightened geopolitical tensions, sticky inflation that kept interest rates higher for most part of Samvat 2080, and valuation woes, Indian stock markets fought numerous challenges over the past one year.

 

Despite this, the BSE Sensex has gained 23.8 per cent, while the Nifty 50 has climbed 25.95 per cent thus far in the outgoing Samvat amid ample liquidity support from retail and domestic institutional investors.

 

Going ahead, analysts see various events, including the ongoing West Asia war between Israel and Iran, Budget 2025, and monetary policies, that may trigger either a correction or a bounce back in stock markets in Samvat 2081.  

 

Here are a few such trends and events that investors need to keep an eye on in Samvat 2081:

 

Growth Rate

A slowdown in India's gross domestic product (GDP) growth rate , in months ahead, could be one of the key concerns for market participants in Samvat 2081.

 

Citing the recent tapering off of passenger vehicle sales, and lacklustre performance of India Inc during the past two quarters (Q1 and Q2-FY25), independent market analyst Ambareesh Baliga cautioned that India GDP growth forecasts "might see a downgrade" for the quarter gone by.

 

"While we are still talking of growth, the pace may have slowed," he said.

 

Geopolitical tensions

While tensions in West Asia, which escalated in October, have shown some signs of cooling-off, recent reports indicate that North Korea has sent its troops to fight beside the Russians against Ukraine.

 

And analysts don't expect a resolution anytime soon. "If the conflict in West Asia escalates, oil prices could turn more volatile, and emerge as a challenge for Indian industry and inflation alike," said Gaurang Shah, head investment strategist at Geojit Financial Services. This, he added, could negatively affect the markets.

 

Interest rates

With inflation rate hinging on oil and vegetable prices -- two key baskets that depend on external factors like geopolitics and monsoon distribution, respectively -- analysts are divided on the road ahead for interest rates in India.

 

While a recent poll by Reuters showed that a slim majority of economists expect the Reserve Bank of India (RBI) to cut its policy rate in December by a quarter point to 6.25 per cent, Ambareesh Baliga said RBI Governor Shaktikanta Das' recent statements suggest that he will not cut rates, at least, till calendar year 2025.

 

Nonetheless, analysts said rate cuts, whether by 2024-end or in 2025, would give a fillip to the markets by boosting liquidity.

 

Budget 2025

Gaurang Shah of Geojit Financial Services noted that the government's policies and reforms will likely provide some upside to the markets in Samvat 2081.

 

"If Budget 2025 (for FY26) is a continuation of what the finance minister elaborated in June, it carries forward the ongoing reforms from here, aiding the market mood," he explained.

 

Among the key policies, Shah said investors should watch out for the government's plan to address unemployment, the roadmap to reach the 7.5-8 per cent GDP growth rate, agriculture-focussed policies, and policies to support new infrastructure.

 

China + 1 and FII flows

The Chinese economy has been beset with numerous issues, including a high inventory of unsold houses, overproduction by its industries, and slackening consumer demand, among others, forcing the government to roll-out a slew of stimulus measures.

 

Analysts said the turnaround and sustainability of growth in the Chinese economy will hold key for foreign investors' flows into Indian markets in Samvat 2081.

 

A maintainable strength in Asia's biggest economy may exacerbate selling of Indian equities by foreign institutional and portfolio investors (FPIs/FIIs) in months ahead, but a reverse of this may bring some upside to export-oriented sectors which, if leveraged carefully, can provide some upside to the markets in the mid- to long-term, Baliga noted.