Top 5 Macro Trends Shaping the 2024 Market Landscape

In 2023, the Indian economy defied global challenges, skillfully navigating heightened interest rates, inflation, and geopolitical tensions. Despite weakening demand, the Indian market displayed remarkable resilience, with the Nifty 50 soaring over 18%. Beyond domestic factors, market sentiment felt the sway of geopolitical events, fluctuations in the US dollar, bond yields, and crude oil prices. Now, let’s delve into the top 5 macro trends that will shape the 2024 market landscape, exploring the pivotal themes influencing domestic market sentiment.

1. Actions of the Central Banks

Anticipated in the upcoming year are interest rate reductions by global central banks, including the US Federal Reserve and the Reserve Bank of India (RBI). The timing and magnitude of these rate cuts will crucially determine market sentiment. Furthermore, the assessment of inflation and growth by central banks will significantly influence the financial landscape.

2. General Elections 2024

With a high likelihood of General Elections in India occurring in April-May, the domestic market anticipates post-election stability. An optimistic outlook follows an NDA victory, though not guaranteeing a significant market surge. Conversely, a defeat could prompt a swift, short-term reaction. However, the market is expected to refocus on fundamental factors and corporate earnings over time.

Ashutosh Tiwari, Managing Director and Head of Institutional Equities at Equirus, highlighted, “Recent victories in MP, Chhattisgarh, and Rajasthan state elections substantially increase NDA’s chances of returning to power in 2024. A 2024 win may not trigger a sharp market rally; it is expected to be business as usual. Nevertheless, a loss could induce an immediate negative market reaction.”

Tiwari emphasized that the present government’s groundwork in infrastructure, manufacturing, and import substitution will propel medium-term economic growth. Despite potential short-term responses, there is no indication of a sharp market correction.

3. Budget 2024

“In February, the budget will function as a Vote on Account before the Lok Sabha elections. Following government formation, the July Budget will become a crucial macro event for the market”, Tata Mutual Fund’s Senior Fund Manager, Sonam Udasi, foresees Budget 2024 maintaining its course on fiscal deficit targets. “The continued emphasis on infrastructure development and initiatives to enhance Indian manufacturing competitiveness is anticipated to persist.”

4. El Nino, development of monsoon

Until June 2024, the lingering impact of El Niño is projected to persist, potentially disrupting monsoon patterns and affecting the cultivation of vital crops. This poses a significant risk to the rural economy, as reported by Reuters. The El Niño weather phenomenon, which induced dry conditions across large parts of Asia this year, is expected to continue in the first half of 2024. This threat extends to the supply of key agricultural products, including rice, wheat, and palm oil, in some of the world’s leading agricultural exporters and importers.

The monsoon’s pivotal role in various aspects of India’s economy, such as inflation, rural income, consumer demand, trade, and farming productivity, underscores the urgency of addressing this ongoing challenge. With over half of India’s population dependent on agriculture for their livelihoods and the sector contributing around 18 percent to the country’s total output, the success of agriculture heavily hinges on the monsoon.

5. Global political changes

Geopolitical elements significantly impact investors’ risk tolerance, triggering volatility in stock markets and currency values. These are the top 5 macro trends shaping the 2024 market landscape.

In addition to these factors, crude oil prices, the trajectory of the US dollar, bond yields, and government policies will actively shape market sentiment in 2024.

Top 5 Macro Trends Shaping the 2024 Market Landscape