India Markets
Here is how the various asset classes in India have performed in the past decade
The Indian markets saw significant recovery and growth in 2024, particularly in Midcap and Smallcap stocks, which gave impressive returns of 24.0% during the year. The broader market also did well with a 14.5% return, outperforming the Nifty which delivered 8.8%. This trend was bolstered by improved corporate earnings, rising consumer demand, and sustained foreign portfolio investments (FPIs). In this backdrop the icAdvisorIndia portfolios, which are oriented towards a mix of Largecaps, Midcaps and Smallcaps, also delivered superior returns during the year. Gold saw notable gains of 19.0%, reflecting its appeal as a safe-haven asset. Debt markets provided modest returns, with long-term instruments yielding 7.0%, slightly benefiting from rising interest rates. Debt instruments, particularly at the longer end of the duration curve, also provided stable returns, benefiting from RBI's interest rate trajectory.
The RBI continued its dual mandate of controlling inflation within the target band of 4% (+/- 2%) while fostering economic growth, maintaining the repo rate at 6.5% for the year, emphasizing inflation control and economic growth. The year saw inflationary fluctuations, peaking at 6.21% in October before easing to 5.48% by November. These dynamics impacted market sentiment, with sectors reliant on discretionary spending witnessing intermittent volatility. In 2023 and early 2024, the RBI's proactive repo rate adjustments were instrumental in curbing inflation, which had shown signs of acceleration due to global factors such as elevated energy prices and supply chain disruptions. By mid-2024, inflation began to stabilize, aligning closer to the RBI's target range. This stabilization has created room for potential future rate cuts, signalling a shift in monetary policy towards growth stimulation.
Additionally, speculation around the general elections and policy continuity influenced investor behavior, causing fluctuations in key indices during the latter half of the year. Before the election, the net profit of the Indian banking sector surpassed $35.9 billion at the end of April 2024 for the first time. During the election, Indian equities saw their worst day in 4 years, dropping 6% after exit polls showed no absolute majority for the BJP. The Indian stock market surpassed the $5 trillion mark, reflecting strong performance, but faced short-term instability. Ripples from China’s deepening real estate challenges affected global investor sentiment, although India remained relatively insulated due to its strong domestic consumption base. The escalating Middle East crisis and its impact on energy prices created short-term market volatility, particularly in energy and logistics sectors.
In summary, 2024 offered a mix of challenges and opportunities for Indian stock market investors. The equity markets benefited from strong domestic demand and strategic government interventions, even as external headwinds tested investor resilience. Those with diversified portfolios and a focus on emerging sectors found the most success, positioning themselves well for the potential growth of 2025. However, those investors who entered the Indian markets in the latter half of the year are most probably seeing red in their folio at the end of the year, and waiting to recoup their losses in 2025.
USA Markets
Here is how the various asset classes in USA have performed in the past six years
The US markets continued their robust recovery in 2024, with the S&P 500 gaining 23.3%, building on its strong 26.9% rally in 2023. Technology stocks, which led the rebound in 2023, remained a driving force behind the market's performance. The Dow Jones Industrial Average (DJIA) rose by 12.2%, while small-cap stocks outperformed, with the Russell Smallcap Index climbing 25.0%. In contrast, bonds offered modest returns, with high-yield bonds yielding 7.0%. Inflationary pressures eased compared to the highs of 2022 and early 2023, but the Federal Reserve maintained its cautious stance, keeping interest rates elevated to achieve its 2% inflation target.
The icAdvisorUSA portfolios, with their strategic focus on technology and growth sectors, delivered competitive returns, aligning with the continued strength of the tech sector. As inflation moderates further, opportunities in growth-oriented assets are expected to persist, setting the stage for potential outperformance in 2025.
The US elections, held in November 2024, played a pivotal role in shaping market sentiment throughout the year. Historically, election years are marked by heightened volatility, as investors weigh the implications of potential policy changes. This trend held true in 2024, with market fluctuations intensifying in the months leading up to the elections. Speculation around fiscal policies, taxation, and regulatory changes led to intermittent corrections in key indices, particularly in sectors sensitive to government spending and policy shifts, such as healthcare and energy. Despite the election-related uncertainty, markets rallied post-election as Investors largely viewed the results as conducive to economic growth, providing a boost to the markets.
The Federal Reserve’s monetary policy remained a central focus. Inflation moderated compared to the peaks of 2022 and early 2023 but stayed slightly above the Fed's 2% target. Consequently, the Fed maintained elevated interest rates to keep inflation in check, avoiding rate cuts despite growing investor anticipation. This approach provided stability but also kept borrowing costs high, tempering growth in certain interest rate-sensitive sectors like real estate and fixed income.
Looking ahead, the 2024 elections has set the stage for policy continuity or potential shifts that could shape economic trajectories in the coming years. The resilience of US equities during a politically charged year underscores their appeal, but investors will closely monitor fiscal and monetary developments in 2025 for further opportunities and risks.
2025 Outlook
Growth in 2024 for India has been revised up by 0.2 percentage point to 7.0% relative to 2023, as rural consumption is benefiting from an improved agricultural season, and as public infrastructure investment continues to expand. According to the IMF, India’s GDP growth is expected to moderate to 6.5% in 2025. With this, India remains the world’s fastest growing major economy.
As the above chart shows, India, China, Russia and the United States are forecast to see slower growth between 2024 and 2025. There have been several notable revisions since the July 2024 World Economic Outlook. For example, the U.S. has had an upwards revision to a forecasted growth of 2.8 % in 2024, from the previously estimated 2.6 %. In 2025, growth is expected to slow to 2.2 % in the U.S. as fiscal policy is gradually tightened and a cooling labor market slows consumption. This is still an improvement from the July forecast, which had estimated growth at 1.9 %.
In terms of risks ahead, the IMF warns of new potential spikes in commodity prices amid ongoing geopolitical conflicts as well as knock-on effects if China sees a deeper - or longer than expected - contraction in the property sector.
Summary
In summary, 2024 was a goodyear for investors, both in India and in the USA, despite the impact of elections. While 2025 holds out the promise for moderation of inflation and reversal of repo and Fed rates, certain global risks can delay these events. Long term investors should look for opportunities to accumulate quality assets into their portfolio at every possible opportunity.
Meanwhile I am using this occasion to reiterate the fundamentals of long-term investing
- Asset allocation–Diversify your financial assets across Debt, Equity, Real Estate, gold, International Equity, etc. depending on your risk profile and age. Real Estate and Gold assets should ideally be used to satisfy consumption needs only. One simple rule of thumb to do this quickly is to subtract your age from 100. The number you get should be the percentage of your assets that you should allocate to equity - the rest should be allocated to Debt and other assets.
- Financial planning - Identify your financial goals and classify them by time horizon – short term, medium term and long term. Use Debt assets to achieve short term goals, mix of Debt and Equity assets to achieve medium term goals and Equity assets for achieving long term goals. This will be the basis of your financial plan.
- Reviewing your plan - Review your financial plan yourself or with the help of your advisor ideally once a year and make adjustments to your asset allocation depending on the prevailing market situation.
- Invest right - When it comes to equity, invest in quality businesses with a reasonable margin of safety and then have the patience to allow the markets to give you returns. This calls for persistence in the face of volatility. Speak to your financial advisor whenever you are in doubt and need a second opinion.
I also want to take this opportunity to thank you for putting your faith in our investment thesis and in our icAdvisor service with your hard earned money. Your continued trust makes us stay committed to the vision encapsulated in our tagline – ‘Growth through Knowledge’. I am available to address client queries at all times and am approachable via email or whatsapp.
Finally I wish you and your family a very healthy, happy and prosperous 2025 in the hope that our relationship will continue to strengthen and grow in the years ahead!
Happy Investing.
Abhijit Talukdar
Founder, Attainix Consulting
SEBI Registered Investment Adviser – INA000006703
Registration granted by SEBI, membership of BASL and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
