First of all, I’d like to wish all of you a very happy new year and hope you have a prosperous one. As we enter the new year, with all the resolutions and ambitions, it is also important to take a small pause, look back, and reflect on the year gone by.

2023 was a remarkable year for Indian equity markets. We saw great rallies, with key benchmark indices like the Nifty50 and S&P BSE Sensex gaining over 20%. The growth can be credited to the active participation from retail investors like you and I and consistent inflows from Foreign Portfolio Investors (FPI).

The Monetary Policy Committee (MPC), at its meeting on December 8, 2023, decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50%. The MPC also decided to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth.

Real GDP grew YoY by 7.6% in Q2 FY24 despite a weak net external demand. It was well cushioned by robust investment and government consumption. Continued strengthening of manufacturing activity, buoyancy in construction, and gradual recovery in the rural sector are expected to brighten the prospects of household consumption.

India’s CPI-based inflation rose to 5.55% in November from 4.87% in October, the lowest level in five months. Food and beverage inflation accelerated sharply to 8.02%, led by double-digit inflation in vegetables, pulses, fruits, and spices. Barring food prices, inflation has moderated across the categories. The pace of the YoY inflation could moderate somewhat due to upcoming favourable base effects in Jan-Feb 2024.

Outlook for 2024

In 2024, the Indian economy is set to distinguish itself, particularly in comparison to the challenges faced by other emerging economies. There is a strong conviction that India will sustain its growth trajectory in the coming year, positioning itself as a stable haven amid the volatility of the global economy.

As per the Survey of Professional Forecasters on Macroeconomic Indicators conducted between 1-4 December 2023, the Real GDP growth forecast for 2023-24 has been revised up by 20 basis points (bps) to 6.40%; it is expected to grow by 6.30% in 2024-25

The consumer confidence survey released on December 8, 2023, shows that consumer confidence for the current period remained stable. Respondents remained optimistic about the one-year prospects for the general economic situation, employment, income, and spending.

Enhanced policy certainty, a sustained decrease in inflation, and improvements in the current account and fiscal deficit have instilled greater confidence in the Indian economy. With a more diversified and broad-based set of growth drivers that are less cyclical, the visibility of growth is projected to improve even more. This positive economic outlook is indicative of a favourable environment for sustained growth.

Let’s hope for the best as these events unfold.

Best regards,

Hemant