India's Stock Market in 2024 and What's Weighing on it Next Year

India's stock market enjoyed a bull run over the past five years, but several factors, chiefly rising US bond yields and a risk of slowing domestic corporate earnings, are likely to weigh on it in 2025.
Rising US bond yields amid disappointing domestic corporate earnings growth and high stock valuations in India have resulted in a recent rush of foreign fund outflows. While domestic institutional investors (DIIs) can absorb some of the sales by foreign investors, increasing primary issuances mean a glut in stock supply, which can impinge the stock markets negatively in 2025.
US bond yields have risen even as the US Federal Reserve has cut its key policy rate by 100 basis points since mid-September, to 4.25-4.5% now. This has resulted in global fund outflows from emerging markets such as India to the safety of the US dollar. (A basis point is one-hundredth of a percentage point.)
Surging bond yields are predicated on fears of rising inflation expectations in the world's largest economy, fuelled by a resilient US economy, and threats of higher import tariffs by US president-elect Donald Trump once he takes office on 20 January.
While the US 10-year bond yield has risen from 3.71% on 18 September—when the Fed began to cut rates—to 4.52% on 20 December, the Nifty fell 7% to 23,588 points over the same period, reducing the returns for the year.
This has caused the yield gap—the difference between the Nifty earnings yield (the inverse of the price-to-earnings ratio) and the US 10-year bond yield—to shrink to near zero from 40 basis points on higher foreign portfolio investor (FPI) outflows from India in that period.
The Nifty earnings yield should typically be higher than the US treasury yield as stocks are a riskier investment than the US benchmark bond. If the yield gap is near zero or negative, that acts as a disincentive for FPIs, who prefer the safety of US bonds over Indian equities.
Denne historien er fra December 26, 2024-utgaven av Mint Mumbai.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9500+ magasiner og aviser.
Allerede abonnent ? Logg på
Denne historien er fra December 26, 2024-utgaven av Mint Mumbai.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9500+ magasiner og aviser.
Allerede abonnent? Logg på
Index options turnover hit by conflict, Sebi investigation
Options trading activity on both BSE and National Stock Exchange (NSE) plummeted to nearly four-month lows in the second week of June, as a sharp decline in trader participation coincided with the escalating Middle East conflict.

The American Investor Taking On Swatch's Founding Family
Wood published research that shows that family-owned businesses outperform the market over time

Amazon CEO says AI will lead to smaller workforce
Nearly one in four U.S. tech jobs posted so far this year are seeking employees with AI skills, as per job-listings data

538 Cr Award to Kochi IPL Team Upheld
The BCCI has been given six weeks to file an appeal before the division bench of the high court or the SC

Meta Offers OpenAI Staffers Bonuses
OpenAI chief executive officer Sam Altman said Meta Platforms Inc. has offered its employees signing bonuses as high as $100 million, with even larger annual compensation packages, as it seeks to build a top artificial intelligence (AI) team.

Vodafone partners with SpaceX rival
Telecom operator Vodafone Idea on Wednesday announced a partnership with Elon Musk-owned SpaceX rival satcom firm AST SpaceMobile for delivering satellite service on smartphones directly.

RJs ditch radio to become influencers
Radio jockeys were the original influencers in the time before social media. So, it's no surprise that RJs are now making the most of their soaring popularity on social media to become content creators and regain their status as influencers.
Alcohol isn't what it used to be but maybe that's alright
On few subjects is there a greater generational divide in the developed world than on the merits of having a cocktail.

Staging Monologues Around Justice And Freedom
Parna Pethe's directorial debut is an experimental piece, featuring four monologues by an all-women cast and crew

Boeing 787's emergency-power system likely active before Air India crash
Investigators believe Air India Flight 171 had an emergency-power generator operating when it crashed last week, raising questions about whether the plane's engines functioned properly during takeoff.