India Strategy - ‘Stock Melt-Up’ Reduces Forward Equity Return Prospects: ICICI Securities

ICICI Securities Report

Emergence of global market risk in August 2024, driven by the fear of an impending U.S. recession and unwinding of yen carry trade had begun to curb the melt-up in stocks. However, in reality, U.S. Q2 GDP has been revised up by 20bps to 3%, largely reflecting better consumer spending and private investments.

U..S core PCE price index rose at a benign rate of 2.6% in July 2024 which keeps the doors open for a rate cut in Sep-24 by the U.S. FED.

In India, Q1 FY25 GDP growth at 6.8% reflected slowing government spending during elections and weather impact on agriculture growth, although ‘gross fixed capital formation’ and ‘private final consumption expenditure’ growth were robust at 7.5% and 7.4%, respectively.

Robust GFCF growth stands out as it reflects robust household spend on real estate and likely pick-up in private capex as government capex dropped significantly during Q1 FY25 general election period.

Similar to U.S., India’s CPI cooled down to 3.5% in July 2024.

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