Pantomath Group Releases Quarterly Market Insights Report

Home-grown financial conglomerate, Pantomath Group has released its quarterly report “Market Kaleidoscope: Quarterly Market Insights” capturing current market trends, sectoral performance, and economic forecasts. This report provides key highlights, an overview of the Indian and global markets, and insights into the Indian IPO market.

Government's push towards infrastructure development and solid economic growth will support consumption is mass as well as the luxury segment, aided by the generational shift. Rising private sector investment, undergirded by an evident revival in both rural and urban demand, is expected to boost the pace of India's economic expansion, underscoring the crucial role domestic consumption plays in ensuring predictability for the country's growth story. There are some lead indications already of new capacity creation in a few industries and a marked pick- up in investment intentions.

The structural long term equity bull market for India is intact driven by strong domestic fundamentals, government policies and Reforms. The Geopolitical tensions, Higher Interest rate & Food Inflation are potential risks for global economic growth. Budget is long term positive and monsoon development looks strong from July onwards. The stable Commodity prices and strong demand environment will keep earning momentum to continue for Indian Corporates. We  continue to reiterate positive views on a market for medium to long term Investment perspectives.

Indian Outlook

The Indian market remained volatile in early June following the final results of 2024 Lok Sabha elections but eventually settled & rallied further in second quarter of FY2025 followed by strong Q1FY25 earning season, economic data and positive global clues. India's growth surged to 8.2% in FY24, driven by a better-than-expected 7.8% expansion in the March quarter, surpassing the anticipated 6.7%, largely due to robust manufacturing. The fiscal deficit was contained at 5.6% of GDP, below the revised estimate of 5.8%, thanks to improved resource mobilization and reduced revenue expenditure.

The BJP, despite a drop in seats compared to 2014 and 2019, secured 272 seats with allied support, leading to a total of 292 for the NDA. This is viewed positively for long-term economic growth, with ongoing optimism for policies and reforms, supporting a medium to long-term positive outlook for Indian equities.

We have seen good monsoon development across country in the month of July and The IMD reiterated again above normal rainfall in August and September month as well. It's positive for overall economic growth and additionally for rural growth revival.

The RBI's maintained growth forecast for the fiscal year 2024-25 remains optimistic at 7.2%, despite indications of a slowdown. Overall, the RBI is navigating a complex economic environment with a focus on balancing growth with inflation control.

The Union Budget 2024-25 is viewed as financially and fiscally balanced, aiming to sustain economic growth.

Mr. Devang Shah, Head of Retail Research, ACMIIL, said, “As per the recent update, so far Festival Season turned out to be good across all categories from consumer durables to Automobile. The customer preference shifted towards premiumisation. The moving forward Wedding season & Christmas will further help to continue this momentum.”

Sectoral Highlights

Auto and Auto Ancillary Sector

As the festive season approaches, there is cautious optimism for recovery with the potential for improved rural demand due to a favourable monsoon and upcoming harvest. The recent developments regarding India's productivity-linked incentive (PLI) scheme highlight its significant benefits for the automotive sector. The government has approved 50 out of 74 applications for the scheme, providing 13-15% grants on the sales value of electric vehicles (Evs). This support helps offset the high manufacturing costs of EVs, making them more competitive with internal combustion engine vehicles. Such favourable policy and demand environment continue to be positive for Auto & Auto ancillary sector for medium to long term perspectives.

Semiconductor Industry and sustainable mobility

The Indian government is extending fiscal support for the India Semiconductor Mission (ISM) from five to eight years, offering benefits such as additional grants for skill training and interest-free loans. This extended support, along with reduced incentives for technology transfer and increased focus on chip fabrication, aims to attract more chip fabrication companies to India.

Electronics Manufacturing Sector (EMS)

The government plans to revive the PLI scheme for white goods to enhance domestic manufacturing of high-value components like compressors and copper tubes. With an aim to boost domestic value addition significantly, the scheme targets increasing local content from current levels to 75-80% by FY29, focusing on reducing import dependency in the ACs and LED lights sectors. The government has started approving investments by Chinese companies, prompting Indian firms to seek joint ventures with Chinese partners. The collaboration will enhance capacity and capability, aligning with the broader electronics industry trend of increasing local production and reducing dependence on imports. It also underscores the importance of foreign expertise and investment in advancing India's electronics manufacturing sector.

Sugar Sector

Positive development for Sugar Sector with a notification, issued by Ministry of Consumer Affairs on August 29, the government announced that ethanol can now be produced from all available feedstocks, including sugarcane juice, B-heavy, C-heavy molasses, and grains. This move marked a reversal of policies imposed in December 2023, which had restricted ethanol production from these routes due to rising sugar prices in the lead-up to the 2024 general election. The government's recent decision to lift restrictions on ethanol production from sugarcane juice and B-heavy molasses routes is likely to drive up ethanol prices before the new season begins.

Cement Sector

In the cement sector, major players are expanding through acquisitions, expecting 6% to 7 % compounded growth in the coming years, with top players set to dominate over half the market by March 2025.

We continue to be bullish on some of the key sectors like Auto & Auto Ancillary, Power, Telecom, Building Materials, Railways, Consumer Durables, Energy, Logistics, FMCG, Capital Goods & Engineering, Infrastructure, Banking and Financials, etc. which are going to be outperformers in the rally ahead. Some of the laggard sectors also have some value buying opportunities to accumulate at lower levels including Information Technology, Specialty Chemicals and Metals, etc

Ms Madhu Lunawat, CIO & Fund Manager, Bharat Value Fund, Stated, “Overall Investment environment remains strong due to favorable economic condition supporting with government policies & reforms. The Sustainable Inflow from domestic Investors is going to support Indian equity market in any kind of correction. The long term bullish structure of Indian economy will continue to attract new domestic & global Investors to Participate in India’s growth story through various Investment avenues.”

Global Outlook

The US economy grew at an annual rate of 3% in the second quarter of CY2024 as per the Second estimate, up from 2.8% in the initial estimate and 1.4% in the first quarter. The upward revision was mainly due to increased consumer spending.

The US economy added 2,54,000 jobs in September 2024, significantly surpassing the revised 1,59,000 in August and forecasts of 1,40,000 marking the strongest growth in six months. This robust data reinforces Fed Chair Jerome Powell's view that the economy is in "solid condition," suggesting the Federal Reserve is not in a hurry to cut interest rates, which dampens hopes for a significant rate cut in November.

President Joe Biden announced he will not seek re-election and endorsed Vice President Kamala Harris as the Democratic nominee. However, analysts noted that Biden's decision was widely anticipated by the markets, and Donald Trump so far remains the favourite to win in November. Although, the presidential debate raised chances for a Kamala Harris election victory.

China reported second- Quarter GDP growth of 4.7% missing expectations of a 5.1% growth. It's slower than the 5.3% GDP increase in the first quarter. China's economy grew much slower than expected in the second quarter as a protracted property downturn and job insecurity knocked the wind out of a fragile recovery, keeping  alive    expectations Beijing will need to unleash even more stimulus. China has unveiled its largest set of economic stimulus measures since the pandemic in an attempt to kick-start growth in the world's second largest economy.

Primary Market

In the first half of 2024, while global IPO markets cooled, India's IPO market saw a remarkable surge, defying the trends observed in the US, Japan, and China. Globally, IPO volumes declined by 12%, with proceeds down 16% year-over-year. However, India's primary market experienced strong growth, with fundraising nearly doubling compared to the previous year. During H1 of FY25, 40 Indian companies raised INR 51,365 crore through mainboard IPOs—a 95% increase over the INR 26,311 crore raised in the same period of FY24. This growth helped India emerge as a global leader in IPO activity, reaching 78 mainboard IPOs in FY24—the highest annual total since FY17 and a 111% rise from the 38 listings in FY23.

“The Indian primary market witnessed a robust influx of IPOs in the first half of the year, supported by positive market conditions, strong economic growth, lower inflation, and stable interest rates. Around 40 mainboard IPOs took place in H1FY25, many of which saw high demand from investors and substantial post-listing gains, reflecting prudent pricing strategies and a favorable market environment. This momentum has increased confidence among promoters to raise funds via IPOs and encouraged investor participation in public offerings,” stated Mr. Mahavir Lunawat, Managing Director of Pantomath Capital Advisors Private Limited.

Mr. Lunawat added, “As the Indian stock market continues to exhibit robust growth despite global uncertainties, a record 15 companies registered their IPO documents with SEBI on the last day of September. This pushed total filings for the month to 41—the highest-ever IPO document filings in a single month.”

India's benchmark indices, the NSE Nifty 50 and the S&P BSE Sensex, have risen by 15% and 13.2%, respectively, making them the fifth and seventh best-performing indices in Asia this year.

QIP Fundraising Hits Record High

Fundraising through qualified institutional placements (QIPs) has reached a record high this year, driven by favorable valuations and liquidity support, encouraging large corporations to pursue significant fundraising rounds. So far, 71 companies have raised INR 88,678 crore through QIPs—the highest in a calendar year.

“QIPs involve only institutional investors and are completed much more quickly. Growth capital in the form of equity is being favored, as growth based on leverage is considered less appropriate,” noted Mr. Mahavir Lunawat, Managing Director of Pantomath Capital Advisors.

Way Forward

Looking ahead, the IPO pipeline for the rest of CY24 remains robust. A total of 25 companies, planning to raise approximately INR 63,550 crore, have already secured SEBI approval, while another 48 companies are awaiting SEBI's nod to raise an estimated INR 91,805 crore. Both domestic and international investors are channelling capital into companies with strong expansion plans, further fuelling India’s IPO boom.