India’s $5 trillion stock market could see gains of up to 20% this year, driven by increased government spending and strong corporate earnings, according to market analysts.
The upcoming government budget is expected to boost consumer spending and infrastructure development, benefiting businesses, strategists and investors surveyed by Bloomberg said. Over half of the 24 respondents predicted the NSE Nifty 50 Index could reach up to 26,000 points by the end of 2024, with one forecasting even higher gains. The benchmark index has already risen 12% this year to a record high.
A reduced majority for Prime Minister Narendra Modi’s Bharatiya Janata Party in recent elections has led investors to focus on the consumer sector, anticipating more populist measures to gain support. An early monsoon has also improved prospects for agricultural companies dealing with crops like rice, corn, and soybeans.
“Corporate earnings for the past year were robust due to margin tailwinds and may grow above trend in the financial year 2025, sustaining India’s medium-term growth story,” said Bino Pathiparampil, head of research at Elara Capital in Mumbai.
Thirteen of those surveyed projected continued robust earnings growth for Nifty components, while five others felt optimism on future earnings was overstated. Analysts expect earnings per share of MSCI India Index companies to increase by 15.6% in 2024, compared to a 10% rise for Chinese firms, according to Bloomberg Intelligence data.
Investors are now focused on the upcoming budget, which will outline Modi’s policy priorities under a new coalition government. Half of the survey’s respondents expect a mix of incentives to support consumption and continued capital expenditure for infrastructure. A quarter believe the main priority will be the capex push, while another quarter think boosting consumer demand will top the agenda.
Respondents generally view consumer discretionary stocks as having the most promising outlook, followed by financial and commodities shares.
“The government can please everyone with higher capex, social spending, and a tighter fiscal policy,” thanks to increased tax revenue and a large dividend payout from the central bank, Jefferies Financial Group Inc. strategists, including Mahesh Nandurkar, wrote in a June 24 note.
The budget is expected to positively impact sectors related to affordable housing, capital expenditures, consumer goods, and rate-sensitive businesses.
