Lok Sabha elections, repo rate cut: Factors that could sway markets in FY25

Stock market outlook: As we transition into the new financial year (FY25), markets look poised for continued upward momentum, analysts said

Indian Stock Market FY25 outlook: Equity markets ended the previous financial year 2023-24 (FY24) on a high note as investors lauded India's strong economic growth, steady earnings of India Inc, and range-bound inflation.
 

Powered by the upbeat sentiment, the S&P BSE Sensex index jumped 14,659.83 points or 24.85 per cent during the previous fiscal, while the Nifty50 soared 4,967.15 points or 28.61 per cent.
 

"The Indian stock market witnessed an exceptional rally in FY24, surging nearly 30 per cent (at the benchmark level), and marking multiple record highs. Now, as we transition into the new financial year, markets look poised for continued upward momentum, fueled by a confluence of positive factors such as a pre-election rally, hopes of easing monetary policy, bullish GDP growth prospects, and bond index inclusion," said a note by Wright Research.
 

Against this, here's a lay down of factors that will shape the markets over the next 12 months:
 

Lok Sabha elections 2024: The biggest factor that will shape the markets this year will be the upcoming Lok Sabha elections (General elections), due in May-June.
 

According to Deepak Jasani, head of retail research at HDFC Securities, the markets' reaction to the outcome of general elections, formation of government, and announcement of the key initiatives and provisions in the Union Budget (in July) will be the highly tracked factor this fiscal year.
 

US, other elections across the globe: The calendar year 2024 will be an intriguing year, according to Narendra Solanki, head of fundamental research - investment services at Anand Rathi Shares and Stock Brokers, where India as well as very nearly 50 per cent of the world's population (across over 60 countries) will go for elections. 
 

Apart from India, the US, the UK, the European Union, Mexico, South Africa, South Korea, North Korea, and Sri Lanka will hold their general elections in 2024.
 

"Consequently, evolving geo-political conditions and global policies will be significant event for investors to watch out for this fiscal," he said.
 

Inflation and monetary policy trajectory: Another factor guiding the market moves, as per analysts, will be the inflation print in the US and India, and the resultant interest rate regimes in individual regions.
 

Domestic inflation, they said, will depend on the intensity and spread of the monsoon, timely onset of the same given likely El Nino and La Nina conditions, and the subsequent impact on food grain production.
 

Besides, the dwindling levels of reservoirs across the country may also have an impact on social, agri, power, and industrial sectors this year.
 

Thus, though analysts believe the Reserve Bank of India (RBI) could begin cutting repo rate in FY25, it will keep these data points on radar as well as wait for the intimation from the Federal Open Market Committee (FOMC) before proceeding with any  rate cut to maintain a balance between interest rates in India and the USA.
 

Corporate earnings: That apart, analysts expect the trends in corporate sector's performance (top and bottomline) and revisions in estimates, if any, to change the course of market movements accordingly.
 

Primary market activity: The IPO exuberance, analysts believe, will likely continue in FY25 given the favorable macroeconomic conditions, including the expected gross domestic product (GDP) growth and India's manufacturing story. 
 

"We believe investors should not miss out on the opportunity of these IPOs, but be selective and cautious in their approach," added Narendra Solanki of Anand Rathi Shares and Stock Brokers.
 

Geopolitical developments: Flare-up of any geopolitical flashpoint, be it across the Taiwan Straits, Russia-Ukraine, the Middle East; trade and technology war between the US and China; and its impact on global growth, risk appetite, commodity prices (including crude oil) will be the fourth factor swaying the markets, said Nishit Master, portfolio manager at Axis Securities PMS. 
 

Economic growth trends: Markets, Sushant Bhansali, chief executive officer at Ambit Asset Management said, will track India's growth expectations as against other global and emerging markets, coupled with China's approach and actions to revive its low-growth economy will guide the markets in FY25.