Taking Stock: Equity Market Outlook in Q4FY24

After stellar Q3 results reported by a vast majority of the companies listed on the Indian bourses, the Indian stock market outlook for the next and last quarter of FY24 looks fairly promising. Despite geopolitical risks on a global scale, the equity market in India appears to continue to hold investors’ interest as we move towards the end of yet another financial year.

With the country’s general elections scheduled for the first quarter of the next fiscal year, the current quarter may also be a defining moment for various sectors in the market. Nevertheless, despite how the equity segment may react in the post-election trading sessions, the current equity market outlook seems to be cautiously positive. This can be traced back to various factors, as explored in the following article. 

IPO Performance and Trends

Much of the positive equity market outlook in 2024’s last quarter stems from India’s IPO  market, which was abuzz with over 90 IPOs in the third quarter of FY24. Around one-third of these were main-board offerings, while the remaining two-thirds were IPOs of small and medium enterprises (SMEs). 

Investors expect this IPO fervour to carry on into the current quarter and beyond, which is one of the key factors driving the bullish market outlook for the financial year 2023-24. Even if certain individual IPOs receive lukewarm responses on a standalone basis, the lineup of new offerings is expected to buoy investor sentiment and keep the equity market outlook positive. 

National and International Influences

Various local and global factors also influence the current equity market outlook in 2024. When we look at what’s driving the market sentiment within India, the anticipation surrounding the general elections emerges as a key driver. As investors continue to watch the current government’s policies as well as the possible outcomes of the elections, the stock market forecast for the next 6 months continues to remain dynamic.

Moving on to international borders, some crises like banking challenges in the U.S., geopolitical tensions, and the impact of armed conflicts continue to add a degree of uncertainty to the equity market. However, on the upside, India continues to attract investors from across the world on account of being one of the fastest-growing economies. 

Another factor driving the positive equity market outlook in Q4FY24 is India’s resilience, coupled with strong macroeconomic factors, demographic dividends and technological advancements in various sectors. Together, the interplay of these domestic and international influences have investors cautiously balancing potential risks against India’s promising economic growth — leading to a largely buoyant stock market outlook.

Sectoral Highlights

While the overall equity market outlook for Q4FY24 continues to ride on the bullish fervour from the last quarter, some sectors stand out from the rest. In particular, the information technology (IT) and healthcare segments of the market are in focus as we take stock of the market outlook in the coming weeks and months.

The technology sector, which has been witnessing heightened activity driven by India’s digital push and transformation, has caught the eye of investors in the country. Additionally, with the rising global demand for tech solutions, the Indian IT sector is poised to grow further and remain resilient to various risk factors.

Similarly, the healthcare sector has also drawn investor attention in recent years. Following up on its critical role during the pandemic and bolstered by the ongoing investments in health infrastructure, this sector is among the key segments driving the positive stock market outlook in Q4. 

Other sectors that continue to remain in focus include renewable energy, construction and infrastructure, financial services, and fintech. Much of this interest comes from the government’s focus on these equity market segments in the interim budget 2024. 

Economic Indicators and Policy Impact

As with all quarters, the economic outlook and stock market predictions for Q4 this year are closely tied to the Reserve Bank of India's (RBI) stance on its monetary policy. Interest rate expectations, in particular, play a pivotal role in shaping market sentiment. As the last quarter of the year progresses, investors continue to observe the RBI's policies keenly. 

There's also a strong expectation that the RBI might cut interest rates or adjust policies to help the economy grow while keeping inflation in check. Such actions may increase the amount of money available for investment and make borrowing cheaper for businesses. This, in turn, would drive company profits upward and also encourage more investments in the stock market.

Moreover, the RBI's stance on interest rates is particularly significant in light of the global economic scenario, where monetary policies of major economies impact capital flows into emerging markets like India. The intersection of these expectations with economic indicators highlights the intricate balance the RBI aims to achieve while guiding market participants towards a cautiously optimistic market outlook for Q4FY24.

Market Projections

Experts predict that the Indian equity market might see varied movements in the remaining weeks of Q4FY24. There's a general bullish sentiment driven by the anticipation of favourable economic policies, a stable political environment in the aftermath of the elections and continued interest from both domestic and international investors. The stock market is also expected to build on the momentum gained from a significant number of IPOs, especially in the SME sector.

However, potential risks like global economic uncertainties, fluctuating oil prices, and inflationary pressures could impact market volatility. The ongoing geopolitical tensions and their effects on global markets also pose a threat to the stability of the Indian equity market. Despite these challenges, sectors like technology, healthcare and energy may offer promising opportunities if they continue to be backed by strong growth fundamentals and increased consumer demand.

Conclusion

The bottom line is that while cautious optimism prevails, investors need to remain vigilant, diversify their portfolios, and focus on sectors with strong growth potential to navigate through the potential market fluctuations in the latter half of Q4FY24.

Research 360 powered by Motilal Oswal can be pivotal in the research required to make informed decisions about investing in different industries and companies. With the ‘Industry Analysis’ feature of the platform, you can get a detailed overview of each industry of the Indian economy including its market capitalisation and key financial ratios of the companies within the industry. 

Additionally, under the ‘Result Analysis’ section of Research 360, you can find a comprehensive analysis of industry-wise and sector-wise quarterly results of companies including the date of publication of the results. This feature of the platform can be extremely useful when companies declare their results at the end of Q4FY24, enabling you to make informed and objective investment decisions.