Strong corporate earnings, higher GDP growth boost investor confidence: NSE report

Strong corporate earnings and higher-than-expected GDP growth have boosted confidence of investors in the Indian stock market, a recent report by National Stock Exchange (NSE) has highlighted.

The report highlighted that domestic investors have been the primary drivers of the recent bull run, as foreign investors have scaled back their involvement.

“With strong corporate earnings and higher-than-expected GDP growth adding to why domestic players, both direct and indirect, have been major players in the markets, as foreign interest recedes,” said NSE. This trend reflects a shift in market dynamics, where local investors are stepping up to fill the gap left by the retreating foreign investors.

The report also offers an optimistic outlook for the Indian equity markets, driven by robust growth expectations for the Indian economy. It notes that FY24 marks the third consecutive year of significant economic expansion, with the GDP growing by 8.2 per cent. This follows growth rates of 9.7 per cent in FY22 and 7.0 per cent in FY23, establishing a consistent pattern of over 7 per cent growth annually.

The Reserve Bank of India (RBI) projects that the growth rate for the current year will be 7.2 per cent, reinforcing India’s status as the world’s fastest-growing large economy.

On the external front, the report pointed out that India’s balance of payments remains stable, with a current account surplus of USD 5.7 billion. This positive balance has contributed to a favorable economic outlook, further supported by S&P’s upgrade of India’s sovereign rating outlook to ‘Positive.’

Additionally, the fiscal deficit of the government has improved to 5.6 per cent of GDP in FY24, which is 20 basis points lower than the revised budget estimate. This improvement is attributed to higher tax collections and effective expenditure rationalization.

The report also outlined key macroeconomic events that will be crucial in the second half of the year. These include the Union Budget announcement in July and subsequent policy directions from the Federal Reserve (Fed) and the RBI. The commentary and actions by these institutions will be significant in shaping the economic and market landscape moving forward.