India’s Stock Market Set for Major Gains as Government Budget Promises Boost

India’s stock market could grow by 20% in 2024, driven by government spending and strong corporate earnings, according to a Bloomberg survey.

Key Points

• The Indian stock market is projected to grow by up to 20% in 2024, driven by government spending and strong corporate earnings.
• The NSE Nifty 50 Index could reach up to 26,000 points by the end of the year.
• Increased investment in the consumer sector is expected due to the government’s potential shift towards more populist measures.
• Corporate earnings for Nifty components are anticipated to remain robust.
• The upcoming budget is likely to focus on a mix of consumption incentives and capital expenditure.
• Consumer discretionary, financial, and commodities stocks are viewed as promising.
• The budget is expected to benefit sectors like affordable housing, capex, consumer goods, and rate-sensitive businesses.

India’s upcoming government budget is expected to significantly boost consumer spending and infrastructure building, a development that bodes well for businesses, according to strategists and investors surveyed by Bloomberg. The $5 trillion Indian stock market could see gains of up to 20% for the entire year, driven by government expenditure and sustained momentum in corporate earnings.

More than half of the 24 respondents in the Bloomberg survey predicted that the NSE Nifty 50 Index might climb up to 26,000 points by the end of 2024, with some foreseeing even greater increases. The benchmark index has already risen 12% this year, reaching a record high.

Impact of Government Spending and Consumer Sector Investments

A reduced majority for Prime Minister Narendra Modi’s Bharatiya Janata Party in recent elections has led investors to place higher bets on the consumer sector. This shift is based on expectations that the government will adopt more populist measures to maintain support. Additionally, an early monsoon has improved prospects for companies involved in crops like rice, corn, and soybeans.

“Corporate earnings for the year gone by had been robust on the back of margin tailwinds and may grow above trend in financial year 2025, keeping India’s medium-term growth story intact,” commented Bino Pathiparampil, head of research at Mumbai-based Elara Capital.

Corporate Earnings and Market Expectations

The survey revealed that 13 respondents projected earnings growth for Nifty components to remain strong, while five believed that optimism about future earnings might be overdone. Analysts estimated a 15.6% year-on-year increase in earnings per share for MSCI India Index companies in 2024, compared to a 10% rise expected for Chinese firms.

Budget Priorities and Sectoral Outlook

Investors are now keenly awaiting the upcoming budget, which will outline Modi’s policy priorities under a new coalition government. Half of the survey respondents expect the government to focus on a mix of incentives to support consumption while continuing its capital expenditure push for infrastructure. Meanwhile, a quarter of the respondents believe that the government’s primary focus will be on capex, and another quarter anticipate a priority on boosting consumer demand.

The respondents also highlighted consumer discretionary stocks as having the most promising outlook, followed by financial and commodities shares. “The government can please everyone with higher capex, social spending, and yet a tighter fiscal,” noted Jefferies Financial Group Inc. strategists, including Mahesh Nandurkar, in a note.

Positive Budget Implications

The upcoming budget is anticipated to be favorable for sectors related to affordable housing, capex plays, consumer goods, and rate-sensitive businesses. This comprehensive approach aims to address various economic needs, leveraging increased tax revenue and significant dividend payouts from the central bank to balance spending and fiscal discipline.