Indian Share Market Forecast

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To project the growth of global capital markets, our economists built on their forecasts for long-term economic expansion. They found that, although real GDP growth has slowed in both developed and emerging economies in the past 10 to 15 years, income convergence between emerging and developed economies remains intact, despite shocks in the global economy including the global financial crisis and the Covid pandemic. As incomes converge, that implies the share of global GDP accounted for by EMs will continue to rise over time: Their incomes will converge gradually towards developed economy levels, and the distribution of global income will shift towards this growing group of middle-income economies.

Given the relationship between equity market capitalization ratios and GDP per capita levels, Goldman Sachs Research expects equity assets to grow more rapidly than GDP as EM income levels rise. Part of this increase is likely to come from rising valuation multiples. But our economists expect the main dynamic to be the equitization of corporate assets, the deepening of capital markets, and the disintermediation that takes place as financial development proceeds (in lower income economies, a relatively large share of companies tend to have a single owner with full control, whereas advanced economies have a greater proportion of exchange-quoted companies with thousands of shareholders). New issuance and privatizations are expected to be an important part of that process.

Goldman Sachs Research also examined forecasted shifts in market share within the DM and EM categories. In advanced economies, our economists expect, most notably, for the U.S. to decline from 60%, but stay at a relatively high share of around 50%. By contrast, both Japan and the euro area are expected to decline at the expense of other DM economies (such as Canada and Australia, among others, reflecting faster potential growth in the latter).

Developing open capital markets is especially exposed to those risks because they depend on the ability and willingness of investors to commit capital to foreign jurisdictions. So far, the rise of populist nationalism has led to a slowdown rather than a reversal of globalization, according to our economists. The development of deep equity markets also requires a commitment from domestic policymakers to follow a mix of capital-market-friendly policies that encourage things like innovation, transparency, listing, and protection of private property rights.

This article is being provided for educational purposes only. The information contained in this article does not constitute a recommendation from any Goldman Sachs entity to the recipient, and Goldman Sachs is not providing any financial, economic, legal, investment, accounting, or tax advice through this article or to its recipient. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the statements or any information contained in this article and any liability therefore (including in respect of direct, indirect, or consequential loss or damage) is expressly disclaimed.

Companies around the world have been outsourcing services such as software development, customer service and business process outsourcing to India since the early days of the Internet. Now, however, tighter global labor markets and the emergence of distributed work models are bringing new momentum to the idea of India as the back office to the world.

India began laying the foundation for a more digital economy more than a decade ago with the launch of a national identification program called Aadhaar. The system creates biometric IDs to establish proof of residence and has been instrumental in digitizing financial transactions, among other benefits.

Investing in India is a long-term theme, and one that comes with its share of risks, including prolonged global recession, adverse geopolitical developments, domestic policy changes, lack of skilled labor, energy shortages and commodity volatility.

J.P. Morgan economists expect U.S. and global growth to slow by the end of 2024. At the same time, liquidity continues to contract as major central banks shrink balance sheets at an unprecedented pace and borrowing rates remain restrictive across consumer and corporate segments.

Geopolitical risks also remain high, with two major conflicts currently ongoing and national elections soon taking place in 40 countries, including the U.S. As such, equity volatility is expected to generally trade higher in 2024 than in 2023, and the extent of the increase depends on the timing and severity of an eventual recession.

A bumpy start to the year is expected for emerging markets (EM) given high rates, geopolitical developments and lasting U.S. dollar strength. However, EM should become more attractive through 2024 on EM-DM growth divergence, demand for diversification away from the U.S. and low investor positioning.

Potential stickiness on the way down will put pressure on central banks to stay higher-for-longer and push back on premature expectations of cuts. On the other hand, downward pressure on inflation will give confidence to DM central banks that the delivered tightening has been effective in taking inflation back toward target.

In the U.S., the Federal Open Market Committee (FOMC) will likely start cutting rates in the third quarter of 2024 at a pace of 25 bp per meeting, while quantitative tightening (QT) will continue through 2024.

To keep the oil market balanced however, the OPEC+ (Organization of the Petroleum Exporting Countries) alliance will likely need to continue to constrain production. J.P. Morgan Research expects Saudi Arabia and Russia to extend their voluntary production/export cuts through the first quarter of 2024. Assuming Saudi Arabia pumps additional oil and Russia increases exports, global oil inventories will likely stay flat in 2024.

Turning to metals, gold and silver are forecasted to outshine the rest of the sector. The Fed cutting cycle and falling U.S. real yields are expected to push gold prices to new nominal highs in the middle of 2024, reaching an average of $2,175/oz by the fourth quarter. In the same vein, silver prices will likely follow gold, averaging around $30/oz in the fourth quarter.

Looking at the euro, prospects for a convincing rebound in 2024 appear dim as the region is flirting with recession amid restrictive rates. A recovery in the single currency would require not only Fed easing, but also improved prospects of regional growth.

J.P. Morgan Research forecasts headline and core inflation in EM ex-China and Trkiye to fall around 100 bp, converging near 3.5% yoy by the end of 2024. Monetary policy will stay restrictive as rate cuts will likely remain measured.

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After experiencing significant volatility, the Indian benchmark indices resumed their upward momentum last week, with both the Nifty 50 and Sensex achieving their second-best weekly gains in 2024, led by favorable domestic and global factors.

The Nifty 50 closed the week with a gain of 2.03%, marking its most significant weekly increase since January 2024, while the Sensex also ended the week with a gain of 1.85%, its highest since January.

Several factors contributed to this upward movement. Firstly, there were expectations of a rate cut from the US Federal Reserve. Additionally, forecasts indicating an earlier start to the monsoon season with expectations of above-average rainfall boosted market sentiment.

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