Q3 FY24 Results Preview - Domestic Cyclicals To Drive Earnings Amid Benign Macros: Motilal Oswal

Motilal Oswal Report

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Rewind and relive the magic:

India ended the eventful CY23 on a high note, with the nifty delivering 20% returns, marking the eighth consecutive year of a positive close. The expectations of the peaking of rate hike cycle, moderating inflation, improving liquidity, and consistently rising retail participation in equities, along with strong corporate earnings, drove this performance.

The resounding victory of Bharatiya Janata Party in the three key state elections in December 2023 added to the positive sentiments as it further strengthened the expectation of political continuity after the 2024 General Elections in April/May 2024.

Even over the long term, India continues to be one of the top-performing markets with a 3-/5-/10-year return compound annual growth rate of 16%/ 15%/13% (in local currency terms) and a CAGR of 11%/11%/10% (in $ terms).

Sharp outperformance by mid/small-caps:

The highlight of CY23 for Indian markets was the sharp outperformance of mid- and small-cap stocks.

The nifty midcap 100 (up 47% YoY) and the nifty smallcap 100 index (up 56% YoY) outperformed the nifty by a wide margin in CY23.

Even as foreign institutional investors flows turned around in CY23 ($21 billion of inflows in CY23 versus $17 billion of outflows in CY22), the domestic flows remained resilient with $22 billion of inflows (+ $32 billion in CY22) amid hectic primary and secondary market activities.

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