Kotak Mahindra Asset Management Company Ltd (“KMAMC” / “Kotak Mutual Fund”), today released its Market Outlook for 2024. Kotak Mutual Fund, which recently completed 25 years in the industry launched the report highlighting various investment themes that investors can watch out for in the upcoming year, while sharing the macro-economic perspective on the direction for the Indian economy and capital markets.
The Report Highlights Seven Key Themes That Can Aid The Markets in 2024.
- Capex Cycle Revival : India is entering a significant multi-year capex (capital expenditure) cycle, marking a pivotal moment for economic growth. This cycle is at a decadal high, driven by increased public capital expenditure and all-time high-capacity utilization, hinting at a potential upturn in private capital expenditure. Additionally, companies are deleveraging. The expansion in the corporate order book across various sectors underscores the breadth and depth of this capex cycle. The number of projects has reached levels last seen in 2017, while the total project cost has surged from 1,792 billion in 2017 to 2,665 billion in 2023.
- Government Focus on Defence, Railways & Infra : There is an increased focus on key sectors such as defence, railways, and infrastructure, which are crucial for India’s long-term development. The Production Linked Incentive (PLI) scheme emphasizes this focus by encouraging domestic manufacturing and augmenting sectoral growth. The budget allocation for central government capital expenditure (capex) has seen significant increases: a 29% rise for roads and bridges, a 26% increase for railways, and a 10% growth in defence.
- Real Estate & Home Improvement : The real estate sector in India is showing signs of improvement. Factors such as increasing income levels and a stable affordability index, despite rising home prices, are positive indicators. This trend has led to a decrease in unsold inventory levels. However, rising inflation and interest rates could affect short-term momentum.
- Penetrating Financial Services : The financial services sector is poised for growth, evidenced by robust loan and deposit expansion in the banking sector, showing year-over-year growth of 12.7% and 15.9%, respectively. Mutual fund Assets Under Management (AUM) have risen from 39.5 trillion in October 2022 to 47.8 trillion in October 2023. Demat accounts have surged from 3.6 Crore in 2018 to 11 Crore in 2023. In the insurance sector, private companies’ new individual premium growth has reached 24% in 2023, up from 22% in 2022.
- Rural Revival : The push for infra development and local manufacturing is set to directly benefit rural income levels, by way of roadway expansion and new manufacturing plants in rural locales. This infrastructure proliferation may create employment opportunities, thereby uplifting consumption Farm incomes have proven resilient as well, reinforcing a constructive rural economic outlook. Moreover, the lowering of MGNREGA work demand hints at stabilizing rural labor dynamics. Together, these trends point to an encompassing revival across rural India.
- Healthcare : Healthcare spending is set to increase with the rise in GDP. As the population ages, there’s a global trend of increasing medical spending. India’s healthcare expenditure, as a percentage of GDP, can be expected to grow, reflecting the growing healthcare needs of an aging population.
- Capitalizing on Global Supply Chain Shifts : The company sees a structural push to manufacturing coming from the China+1 strategy, and PLI schemes and the next decade may probably see the rise of India’s manufacturing sector, filling the missing piece in India’s growth puzzle. The country’s favorable demographics and low labor costs make it an attractive manufacturing hub. India’s increasing involvement in international trade and negotiations for significant trade agreements highlight its intent to integrate more deeply into the global economy.
According to the report, India is expected to make the most significant contribution to global economic growth. The economy stands resilient, showcasing a GDP growth upwards of 7%4, surpassing global expectations. 2023 marks India’s transition from a coach to an engine of global growth. The country’s robust activity level and capacity utilization, buoyed by a recovered Monsoon and strong Diwali season sales, point towards a revitalized rural economy.
The report highlights key insights into the debt market, including the duration strategies. Categories like the Dynamic Bond Fund, Gilt Fund, Banking and PSU Fund & Medium-Term Funds can be considered, as they add duration to fixed income portfolios. Government Fiscal Policy and central bank actions, both in the US and India, will be crucial in determining interest rate movements & shape of yield curve going forward.
Nilesh Shah, Managing Director, Kotak Mahindra AMC said, “We are at the cross Road of Geopolitics and Economics. Clamour for Interest rates may remain higher for longer stands with looming threat of a recession. Fine balancing done by the central banks between Growth and Inflation stands with fiscal profligacy. In a world full of uncertainty, it is extremely challenging to forecast market. We are excited to release the Kotak Mutual Fund – Navigator for CY24 that brings together events and data points which will help an investor navigate the choppy market. ”
About Kotak Mahindra Asset Management Co. Ltd. :
Kotak Mahindra Asset Management Company Limited (KMAMC) – a wholly owned subsidiary of Kotak Mahindra Bank Limited (Kotak), is the Asset Manager for Kotak Mahindra Mutual Fund (KMF). KMAMC started operations in December 1998 and as of 30th September’2023, has over 53 lakh investor folios in various schemes. KMF offers schemes catering to investors with varying risk – return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities. The company is present in 92 cities and has 97 branches as of 30th September’2023.
Sources: Spark Research, Budget Documents & KIE | Forecast of FY23BE, AMF & SEBI and RBI, 8 Dec 23
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
