India is currently experiencing a “mini-goldilocks” moment due to solid macroeconomic conditions, healthy corporate earnings, peaking of interest rates and moderate inflation print, Motilal Oswal Financial Services Ltd (MOFSL) has said.

With size and growth in its wings, the country’s capital markets are truly poised to embrace “Amritkaal”, it said in its latest “India Strategy” report, released ahead of the Q4 results season. Amrit Kaal is the Prime Minister’s vision 2047 for ‘New India’, a new dawn for the country which will bring with it the chance to fulfil the nation’s aspirations.

The MOFSL report titled ‘India: Big, Bold and Blazing—Ushering the Amritkaal’ sees India’s GDP exceeding $4 trillion in FY25-26 and $8 trillion by FY34. India is set to exit the fiscal 2023-24 with a GDP of $3.6 trillion and an underlying growth of 7.6 percent. “Expectations of political continuity after the forthcoming Lok Sabha elections 2024 should bolster the overall economic momentum further, with a focus on infrastructure, capex and manufacturing occupying the centre stage, in our opinion”, the report added.

Nifty earnings growth

MOFSL estimates Nifty earnings to grow 6 percent year-on-year in fourth quarter ended March 31, 2024. Overall earnings growth is anticipated to be driven, once again, by domestic cyclicals, such as Auto and BFSI, which are expected to post 20 percent and 15 percent year-on-year growth, the report said. “Our FY24 Nifty EPS (Earnings per share) remains stable at ₹980, while the FY25 EPS has witnessed a cut of 1 percent to ₹1,332. We expect the Nifty EPS to grow 21 percent and 16 per cent in FY24 and FY25, respectively,” the report added.

The continued rise in retail participation, along with increasing SIP contributions and the addition of new demat accounts (over 3.6 million accounts per month during October 2023-March 2024) amid the ongoing trend of financialisation of savings, has supported the markets in the face of global volatility, according to MOFSL.

India’s capital markets have witnessed vibrant participation from domestic retail savers, with demat accounts surging to 15.1 crore in March 2024 from 3.6 crore in March 2019. Cumulative domestic equity flows have amounted to $92.7 billion over the last five years. India’s market capitalisation has reached $4.4 trillion making it the fifth largest in the world. 

India’s market capitalisation-to-GDP ratio is now at 132 percent (of FY24E GDP), above its long term average of 80 percent. “We expect the nominal GDP to increase 9.1 percent year-on-year in FY24”, MOFSL report said.

The combined net FPI and DII inflows into the equity markets in 2023-24 stood at little over $50 billion.