NSE :Market Pulse: February 2024
Introduction
The February 2024 issue of Market Pulse provides an in-depth review of the Indian economy and financial markets. This edition covers key developments, market statistics, research insights, and topical articles. It offers a comprehensive understanding of the current economic landscape, focusing on growth, investment, fiscal prudence, and the impact of technological advancements.
Market Overview
Global Market Performance
Global markets reached new highs, driven by a surge in equities. The US S&P 500 surpassed the 5000 mark, reaching 5100, while European and Japanese markets also saw significant gains. The Indian markets hit lifetime highs in February, with broad-based participation from small and midcaps. The NIFTY50 index was a major performer, attracting significant retail investor interest.
Investor Activity
The number of investors in India is approaching 9 crores, up from 2.7 crores in 2019. North India leads with 3.1 crore investors, followed by West India with 2.8 crore. January 2024 saw retail investors contribute over Rs 36,000 crore, with SIP inflows hitting a record Rs 18,838 crore. Passive funds, especially non-gold ETFs, gained popularity.
Market Turnover
January 2024 witnessed record trading activity, with average daily turnover in the cash market crossing Rs 111,000 crore. Derivatives markets also saw a lifetime high in participation. Equity options and futures continued to dominate market turnover, with significant contributions from individual investors and proprietary traders.
Economic Indicators
GDP and Growth
India’s GDP growth exceeded expectations, leading to upward revisions. The IMF upgraded its FY24 growth estimate for India from 6.3% to 6.7%, with a forecast of 6.5% for the following year. Industrial activity showed a mixed picture, with some sectors performing better than others. The manufacturing PMI remained in the expansion zone.
Inflation and Monetary Policy
Headline CPI for January was 5.1%, with core inflation falling to a three-year low of 3.6%. The RBI maintained interest rates, with a CPI forecast of 5.4% for FY24. Liquidity conditions tightened, and call money rates remained above the repo rate. The US 10-year yield rose to 4.3%, influencing global debt markets.
Fiscal Policy and Budget
The Union Budget 2024-25 focused on growth, stability, and fiscal prudence. The budget emphasized capital expenditure, with a significant allocation for infrastructure, housing, and defense. The fiscal deficit for FY25 is budgeted at 5.1%, with a commitment to reduce it to sub-4.5% by FY26. Gross market borrowing for FY25 is pegged at Rs 14.1 lakh crore.
Household Consumption
Rural vs. Urban Consumption
The latest Household Consumption Expenditure Survey (HCES) indicated a narrowing gap between rural and urban consumption. The share of food expenditure decreased for both rural and urban areas. The average Monthly Per Capita Income (MPCE) gap between rural and urban sectors narrowed significantly, reflecting improved economic conditions in rural areas.
Insights from HCES
Conducted over 261,000 households, the survey highlighted changes in consumption patterns, with a notable shift towards non-food items. The survey's findings are expected to influence future revisions of the CPI basket, providing a more accurate reflection of current consumption trends.
Research Insights
Nifty REITs & InvITs
A white paper by NSE Indices Limited detailed the performance of Nifty REITs & InvITs, showing robust returns and increased investor interest. The report highlighted the growing significance of these investment vehicles in the Indian market.
Credit Constraints and Investment Behavior
A study examined the credit constraints faced by Indian firms, evaluating the impact of a directed lending program. Another paper found that male and overconfident individuals tend to invest more than optimal due to inflated perceived abilities.
Robo-Advisors and Shadow Economy
Research indicated that the use of robo-advisors is increasing, potentially reducing demand for human financial advisors. A study explored the role of psychological and behavioral factors in the shadow economy, suggesting ways to shrink it through financial development.
Generative AI and Market Impact
Nvidia and AI Advancements
Nvidia reported a 265% jump in quarterly revenues, highlighting the growing demand for AI chips used in model training and inference. Generative AI is expected to drive productivity improvements and create significant value, especially for companies leveraging proprietary data.
AI in India
The report emphasized India's potential to lead in AI development, given its scale and technological infrastructure. The use of AI in public services and governance could offer substantial benefits.
Market Activity and Statistics
Equity Market Performance
Detailed analysis of sector-wise performance, with a focus on the contributions of different sectors to the Nifty 50 index. Examination of forward P/E and P/B ratios for Nifty 50 and other indices, providing insights into market valuation trends.
Fixed Income and Commodities
Analysis of sovereign and corporate bond yields, with a focus on term premia and yield spreads. Performance of key commodities, including energy and agricultural products, with a review of price movements and returns.
Currency and Forex
The Indian Rupee's performance against major currencies, including volatility trends and forward premiums. Analysis of India’s forex reserves and import cover, indicating a comfortable external situation.
Conclusion
The February 2024 edition of Market Pulse offers a detailed examination of the Indian economy and financial markets, highlighting the interplay of growth, investment, and fiscal prudence. With insights into market performance, economic indicators, household consumption, and research findings, this issue provides a comprehensive understanding of the current economic landscape and future prospects.