Introduction
Nomura Expects India’s GDP Growth to Hit 5.7% in 2024
Analysis in Simple Terms
Nomura’s Bullish Forecast for India’s GDP
Nomura is a large Japanese financial services company offering investment analysis and recommendations worldwide. Its latest Asia economic outlook flags India as a standout growth market for 2024 and over the medium term this decade. Specifically, it forecasts Indian GDP or overall economic output to expand by 5.7% in 2024. This would make India one of the fastest growing Asian economies next year alongside Indonesia and Philippines.
Robust economic growth typically attracts greater investment inflows while boosting profitability of Indian companies. It also supports RBI’s current strategy to leave interest rates unchanged this week after prior hikes to control inflation. Overall, Nomura’s strong India growth forecast signals positive investment conditions looking ahead.
Original Analysis
Nomura’s Bullish Projection for India
Nomura’s India projection sharply exceeds 2024 expectations for most major economies globally. It implies the country will significantly outpace mature Western economies and fellow emerging giants like China and Brazil next year.
Attractive growth coupled with Nomura’s expectation of cooling inflation dropping to 5.1% in 2024 sets the stage for fiscal and monetary stimuli. This includes RBI potential rate cuts from mid-2024. Together with India’s large consumer base, ongoing formalization and reforms, these catalysts can unlock a virtuous cycle of consumption, investment, and job creation.
However, political events like 2024 general elections and global recession risks pose wildcards. Any shift from current policy continuity or global slowdown due to interest rate tightening worldwide could temper India’s growth trajectory.
Impact on Retail Investors
Opportunities for Retail Investors
For retail investors, India’s strong 2024 growth outlook signals opportunities across both equities and fixed income. Sustained economic momentum and policy easing can buoy corporate earnings and widen the listed universe. Additionally, peak policy rate expectations getting priced-in make bonds attractive on yield upside if rate cuts materialize as Nomura expects.
However, investors must balance tactical positioning to ride growth and policy tailwinds with managing event risks surrounding elections and external shocks. These uncertainties warrant adequate portfolio diversification and liquid holdings. Investors should also anticipate interim volatility surrounding polls and global developments even if India’s consumption and investment themes remain compelling from a multi-year perspective.
Impact on Industries
Nomura’s Forecasts Benefit Various Industries
Nomura’s forecasts signal particular upside for domestically oriented sectors geared to consumption and investment spend against the backdrop of strong growth and easing rates.
Beneficiaries include:
- Financials: Rate cuts from mid-2024 can drive credit demand while economic expansion cuts NPAs. Leading lenders like HDFC Bank, ICICI, and Kotak Mahindra stand to gain.
- Autos: Low penetration, urbanization, and supportive policies back strong volume growth across cars, bikes, and vehicles. Maruti, M&M, and Bajaj Auto well positioned.
- Capital Goods: Government infrastructure push and private capex cycle signal opportunities for engineering majors L&T, Thermax, and Cummins.
Conversely, export-linked sectors face growth headwinds from the global slowdown. IT services players like TCS, Infosys, and HCL Tech warrant caution amid client spend cutbacks.
Long Term Benefits and Negatives
Prospects and Risks Over the Long Term
Over a 5-10 year horizon, Nomura’s outlook underscores India’s potential as an outperforming Asian economy this decade given positive demographics and unfinished consumption story. This affords significant room for manufacturing- and services-led growth allied with global competitiveness gains from policy reforms. Top-down expansion will create opportunities spanning infrastructure, real estate, financial services, and discretionary categories.
However, global shocks causing prolonged risk aversion or inflation relapse constricting nominal GDP growth present key downside risks. Poor crop cycles and slow job creation amid limited land and labor reforms also pose structural constraints relative to comparatively agile manufacturing-driven Asian peers.
Short Term Benefits and Negatives
Near-Term Prospects and Risks
The current 2023-24 cycle offers a supportive backdrop of moderating inflation, robust growth, and potential rate cuts. Listed companies geared to domestic investment and consumption spend can deliver strong earnings and valuation upside over a 6-12 month horizon.
But interim volatility is likely surrounding 2024 general elections, global recession worries, and inflation relapse risks if agriculture shocks or energy prices resurge. Investors must temper return expectations and risk appetite accordingly despite the constructive medium-term outlook.
Top Gainers
Top Performing Equities
Key equities offering attractive risk-reward over a 12-24 month horizon include:
- HDFC Bank: India’s largest private lender stands to gain immensely from rate cuts, economic expansion, and formalization aiding wider credit penetration. Potential upside catalysts also include merger with HDFC Ltd and strong digital platform.
- Infosys: While IT faces global spend risks, Infosys’ solid order book, margin levers, and reasonable valuations support upside. Its dividend yield also offers stability.
- Larsen & Toubro: The infrastructure and engineering leader epitomizes domestic capex revival across real estate, power, and infrastructure. Order book expansion likely with strengthening public and private capital spending.
Top Losers
Challenges for Export-Linked Sectors
Export-led sectors face growth risks from the looming global slowdown. Software services majors including TCS, Wipro, and HCL Tech warrant caution as discretionary IT spending by developed economy clients suffers cutbacks.
Pharma majors like Sun Pharma and Dr. Reddy’s also rely significantly on US and Europe end-markets. Further generics pricing pressures or delayed product approvals present headwinds amid muted overseas growth.
Conclusion
Nomura’s Strong 2024 India Growth Forecasts
Nomura’s strong 2024 India growth forecasts underscore the economy’s robust post-pandemic recovery and solid medium-term consumption potential. But investors should balance tactical bets with managing political and global uncertainty risks in the interim.
Citation: ET Bureau. “India Will Be Among Fastest Growing Asian Economies in 2024: Nomura.” The Economic Times, 7 Dec.