Despite Volatility, Indian Markets Show Resilience with Positive Returns for 2024

Despite a recent downturn, Indian equity markets are poised to close 2024 with positive returns, marking the ninth consecutive year of growth — the longest streak of annual gains on record, according to a report by Standard Chartered Bank.

This achievement underscores the resilience of the Indian economy and its financial markets. The report noted that 2024 had two distinct halves. The first half (H1) was characterized by strong growth, bolstered by robust economic activity and solid corporate earnings. However, the second half (H2) saw heightened volatility, driven by slowing economic growth and earnings, coupled with higher-than-usual interest rates as the Reserve Bank of India (RBI) focused on curbing inflation and managing credit risks.

The report stated, "2024 was a year of two halves with H1 seeing strong performance of Indian equities and bonds on strong economic growth and corporate earnings delivery. However, H2 witnessed a surge in volatility."
These challenges contributed to record foreign investor outflows, dampening market sentiment. Nevertheless, the Nifty 50 index has gained 9.21% this year, while the Sensex index has risen by 8.62%, demonstrating the resilience of India's markets.

Looking ahead, the report expressed optimism for 2025, forecasting an improvement in economic growth. This recovery is expected to be driven by stronger domestic demand, supported by increased government spending and improved private consumption. An uptick in rural incomes is also expected to contribute to this rebound.

However, the report highlighted potential risks, including uncertainties surrounding US President-elect Donald Trump’s proposed policies, especially increased tariffs. A potential escalation of the trade war could adversely affect India’s growth outlook. Despite this, the report suggested that India’s large, domestically-focused economy and its relatively small contribution to US imports (around 3%) might mitigate the worst impacts of global trade tensions.