India’s market capitalization increased by an astounding 9% in December, making it the largest among the top ten equities markets in the world. After declining for four straight months, this performance represents its biggest uptick in over three years.
So far in December, foreign investors have invested about $2.37 billion in Indian stocks, reversing the net outflows of $11.2 billion in October and $2.57 billion in November. In contrast, domestic indicators produced a range of outcomes. The BSE SmallCap index saw a slight fall of 0.3 percent, the BSE MidCap index increased by 0.5 percent, and the benchmark Sensex and Nifty fell by 1.7 percent.
In a generally muted market environment, India’s performance stood out globally. After seven months of straight advances, the largest equities market in the world, the United States, saw its first dip of 0.42 percent, with a market capitalization of $63.37 trillion.
India’s map outperformance occurs despite global volatility brought on by geopolitical tensions, predictions of fewer rate cuts by the US Federal Reserve, and worries about possible tariff conflicts after the US presidential elections. Earlier in the year, investor enthusiasm was tempered by domestic market problems such as delayed government investment, tighter liquidity, slower economic growth, worse corporate results, and ongoing inflationary pressures.
Experts predict that India will continue to be mostly immune to world shocks in the future, including a possible trade war between the US and China. The long-term structural growth narrative of the nation is still intact, but fiscal consolidation and slower loan growth brought on by the Reserve Bank of India’s macroprudential tightening are expected to cause GDP growth to drop to 6.3 percent in 2025.
Additionally, analysts have postponed their prediction that the RBI will lower interest rates. They now anticipate that easing will start in the first quarter of 2025 and that total reductions will not exceed 50 basis points by the middle of the year. Analysts predict that even in a lower interest rate environment, macroprudential circumstances would likely keep retail loan growth muted despite the expected rate decreases.
