India Macroeconomic Challenges and InCred’s Market Outlook

Recent economic data highlights persistent macroeconomic headwinds in India, with key indicators like GST collection growth, automobile sales, and currency stability reflecting subdued performance. According to InCred, these factors are expected to contribute to cautious market sentiment, with the Nifty 50 index likely to remain in a consolidation phase due to prolonged risks to GDP and earnings per share (EPS) growth.
Macroeconomic Challenges
- GDP Growth Outlook
- Bloomberg’s consensus for FY25 real GDP growth continues to decline, driven by:
- Underwhelming capital expenditure.
- A peaking trade deficit.
- Slower GST collection growth (7.3% YoY in December 2024 and 9.1% during the first nine months of FY25).
- Bloomberg’s consensus for FY25 real GDP growth continues to decline, driven by:
- Currency Volatility
- The Indian rupee depreciated 0.7% in December 2024 and saw sharper declines towards the end of the month.
- InCred anticipates further depreciation in the rupee during Q1 FY25, beyond the 1.4% decline recorded in the first nine months of FY25, driven by:
- Strengthening US dollar amid robust US economic growth.
- Global uncertainties, including trade deceleration.
- External Factors
- Global trade growth slowdown and geopolitical factors continue to impact India’s economic environment.
- The impending presidency of Donald Trump is expected to strengthen the US dollar, intensifying pressure on emerging market currencies.
Sectoral Optimism
InCred maintains a positive outlook for:
- IT and Pharmaceutical Sectors: Likely to benefit from the stronger US dollar due to export-oriented business models and global demand resilience.
Union Budget 2025 Expectations
InCred highlights the importance of the upcoming Union Budget 2025, emphasizing:
- Potential income tax cuts to boost domestic consumption.
- Increased government capital expenditure to stimulate economic activity.
High-Conviction Stock Picks and Updates
- Additions:
- Deepak Fertilisers and Petrochemicals Corporation (ADD): Added to the list due to:
- Cost benefits from ammonia expansion.
- Favorable gas contracts driving profitability.
- Deepak Fertilisers and Petrochemicals Corporation (ADD): Added to the list due to:
- Removals:
- Exide Industries (REDUCE): Removed as the stock correction met InCred’s target price expectations.
- BCL Industries (ADD): Excluded after reassessing its biogas segment entry plans.
- Performance Since September 2022:
- Outperformers:
- Skipper (ADD)
- Aditya Birla Sun Life AMC (ADD)
- Bharat Forge (ADD)
- Underperformers:
- Hero MotoCorp (ADD)
- Exide Industries (REDUCE)
- Pidilite Industries (ADD)
- Outperformers:
- Top Absolute Returns:
- Lupin (ADD)
- Bajaj Finance (ADD)
Technical Trend-Favorable Stocks
InCred identified the following stocks with favorable technical trends, all rated as ADD:
- Hero MotoCorp
- Lupin
- Maruti Suzuki
- Bajaj Finance
Disclaimer: The views and recommendations mentioned above are those of individual analysts or brokerage firms and should not be considered as investment advice.