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J.P. Morgan India Equity Strategy: December 2024 Wrap

Market Performance

• MSCI India ($ index): Fell 2.9% in December, underperforming MSCI APxJ/EM indices by 1.6%/2.6% respectively. Driven by weak global cues, hawkish Fed cuts, rupee depreciation, and domestic growth concerns.
  • Large-caps: -2.3%, Mid-caps: +2%, Small-caps: +0.1%, Nifty-50 ended the year at 23,645 (-2.0% MoM).
• Sectoral Performance: Healthcare (+6.7%) and Real Estate (+3.9%) were the strongest. Utilities (-6.5%), Energy (-5.2%), and Materials (-3.9%) were the weakest. Top stocks: Dr. Reddy's, Oberoi Realty, Max Healthcare, Lupin, BSE. Top laggards: Adani Green, NMDC, Siemens, GodrejCP, Hero MotoCorp.
• Currency: INR depreciated 1.3% MoM to 85.61/USD.

Annual Performance & Outlook

• MSCI India (-1.6% MoM) fell for the fourth consecutive year in 2024 (down 2.9% YoY), outperforming APxJ/EM (-2.4% MoY Est.).
• Global stimulus risks hampered performance. Election volatility and policy anxiety were significant factors.
• Record Year: 438 issuances raised Rs 3.5 lakh crore (~$42bn) in 2024. Healthcare, Comm. Services, Consumer Discretionary were top performers. FIIs net sold ~USD 10.4bn in Oct 2024 and MF mutual funds saw inflows Rs 41bn.
• Domestic Ownership: Domestic ownership (BSE 500) rose to 24.5%, reaching near its highest level in ~17 years, compared to FIIs share at 18.1%.

Economic Indicators (December/MoM)

• IP Growth: Oct IP 3.5% YoY (J.P. Morgan: 3.5%, Consensus: 3.6%), sequential +1.1%.
• CPI Inflation: Nov CPI 5.5% YoY (vs 6.2% prev), sequential +0.3%. Headline easing led by weak food inflation (YoY 8.2%) due to vegetable normalization.
• Monetary Policy (RBI MPC - 6 Dec): Repo rate held at 6.5% (dovish), CRR cut 50bps to 4%. Projected Headline CPI 4.5% (vs J.P. Morgan 5.8%), GDP 6.6% (J.P. Morgan 6.4%) forFY25.

Institutional Flows (December)

• FIIs: Net buying INR1.9bn (INR1.3bn FL in H1, INR2.7bn selling in H2; J.P. Morgan flows flat -INR0.1bn YoY). Weak consistent performance.
• DIIs: Net buying INR4.0bn (INR5.3bn prev month; J.P. Morgan flows INR63bn YoY). Strongest 17th consecutive month.
• Mutual Funds: Net buying INR1.7bn. Insurance companies bought INR2.3bn.

Key Highlights

• Valuation Concerns: MSCI India faced correction due to valuation concerns, subdued earnings, slow public capex, tight fiscal/monetary policy.
• Corporate Actions: Diverse developments across sectors (e.g., Vodafone Idea funding, Tata Motors price hike).
• Regulatory Watch: RBI lowered FY25 GDP projection to 6.6%.

Market Dynamics

• India ownership replacing Foreign flows, following Election volatility.

## Global Context
*   MSCI World: -2.5% MoM, YTD +15.7%.
*   MSCI China: Best performer (+2.6% MoM).
*   India worst performer among BRICs. US 10Y yield up 40bps (to 4.57%). geopolitical factors, and valuation concerns highlighted.

The report concludes with detailed market reviews, macro data, and corporate/industry news for December 2024, supporting its outlook assessment.