India Market Update – January 2024

Key Takeaways

  • Compared to global equity markets, Indian equities have performed relatively well in 2023 with stable macro-economic indicators, healthy corporate balance sheets and reasonable earnings. While there may be froth in several segments, India seems to be in a multi-year growth cycle with cyclical upturn in many sectors.
  • India’s underlying economic fundamentals appear strong. They are supported by:
    1. Cyclical upturn in many sectors (Real estate, Auto, Banking, Telecom, etc).1
    2. Manufacturing tailwinds led by China Plus One (C+1) & Product Linked Incentives (PLI).2
    3. Capex recovery and easing inflationary pressure.3
  • The Nifty 50 Index gauges the pulse of Indian capital markets and collectively represents approximately 63% of the free float market capitalisation of listed stocks on the NSE. The index has generated a staggering return of 21.3% in Calendar Year (CY) 2023.4

  • Among sectors contributing the most to the Nifty 50 Index, the auto sector has performed well compared to previous years with multiple companies showcasing promising earnings and the majority beating EBIDTA (earnings before interest depreciation tax and amortisation) and PAT (Profit after Tax) estimates. The factors encouraging this growth were lower commodity costs, better product mixes and price hikes that have led to margin expansion.
  • 2023 marked a slowdown for IT sector/services companies due to lower discretionary spending budgets and longer decision-making cycles by clients, given the uncertain macroeconomic environment and high interest rates.
  • Banks witnessed a strong quarter compared to previous quarters with strong loan growth across different categories. Net interest margins improved in H1FY24 vs H1FY23 on account of repricing of loans & increasing credit penetration across different segments (H1: Half Year Apr 1, 2023 to Sep 30, 2023). The RBI has tightened rules for unsecured consumer lending, asking banks and NBFCs to set aside higher buffers and put in place board-approved policies to monitor exposure limits to this segment.
  • The overall FMCG sector posted muted YoY volume growth even as pricing growth moderated in 2023. The overall demand was dragged by weaker rural demand.
  • Telecom companies recorded healthy growth with mobile network data traffic increasing 33% in H1FY24 & close to 7 million new user additions in the last year. Telecom companies are likely to shift their focus toward monetisation in the near future by announcing tariff hikes, including 5G specific tariffs.
  • Within the energy sector, the growing power deficit in a demand growth environment, as well as underinvestment in the last decade, is expected to create a focus on increasing capacity expansions and higher merchant prices in the coming future.
  • The chemical sector saw muted growth due to slowdown in global markets and high materials and input costs. (The performance of each sector is compared to its proportionate weight in the benchmark index).


As of Jan 15, 2024, the Nifty 50 index is trading at a forward PE of 23.6x, which is a 10% premium compared to its 5-year average of 21.5x.5 Both mid cap and small cap categories outperformed the Nifty 50 index by a margin of 22-28% in CY 2023, however it’s worth noting that these categories historically have seen an elevated amount of volatility in upside and downside cycles.6 In current conditions, with large caps reporting relatively better earnings and profitability in Q2FY2024, the Nifty 50 now seems to be reasonably valued compared to mid and small cap indexes.7

Related Funds

NDIA: The Global X India Nifty 50 ETF (ASX: NDIA) invests in 50 of the largest companies listed in India.