India stock indices nearing fresh record highs, eye global macroeconomic data for cues

This week, Indian stock indices accumulated 0.7-1.0 per cent gains on a cumulative basis. The indices rose for a seventh straight session on Friday, reportedly their longest rally in 2024. However, on the last trading session of the week, Friday, the indices treaded with caution ahead of Federal Reserve Chair Jerome Powell’s much-awaited Jackson Hole Symposium speech, which had global repercussions.

The stock market indices closed largely flat on Friday and slowly closing gaps with their previous highs. Going ahead into next week, GDP updates will be eagerly awaited, notably from India (August 30) and the US, S&P Global Market Intelligence said in its weekly report, Week Ahead Economic Preview.

Inflation readings out of the US and eurozone will be the highlights in the coming week as the market seeks near-term rate guidance. “Growth and inflation conditions updates will be key as central bankers around the world contemplate rate cuts in line with the trajectory expected for the US Fed,” S&P Global Market Intelligence said. US Federal Reserve Chair Jerome Powell gave a strong indication that it was time for the US central bank to reduce interest rates as inflation rates were aligning with its target.

Addressing the much-awaited Jackson Hole Symposium on Friday, Powell said that “the time has come for policy to adjust” but stopped short of giving a hint on the quantum of the interest rate cut. For much of the past three years, inflation ran well above Fed’s 2 percent goal, and labour market conditions were extremely tight.

“A rate cut of up to 25 bps in September is anticipated; if confirmed, it will be taken positively by the market in the short-term. Further trends will depend on the optimistic view of the central banks that the accommodative policy will be sustained, guiding further cuts in the coming policies,” said Vinod Nair, Head of Research, Geojit Financial Services. Coming to GDP, India’s GDP grew at an impressive 8.2 per cent during the financial year 2023-24, and it continued to remain the fastest-growing major economy.

India’s economy grew 7.2 per cent in 2022-23 and 8.7 per cent in 2021-22, respectively, as per the official data.

The Reserve Bank of India, in its latest monetary policy meeting, pegged the GDP forecast for 2024-25 at 7.2 per cent. The GDP growth for Q1 is seen at 7.1 per cent; Q2 at 7.2 per cent; Q3 at 7.3 per cent; and Q4 at 7.2 per cent.

Many other global rating agencies and multilateral agencies have also upped their India growth forecast.

In July, the International Monetary Fund (IMF) has raised India’s growth projections for 2024 from 6.8 per cent earlier to 7 per cent, with the country maintaining the fastest-growing status in emerging markets and developing economies.

The Economic Survey tabled in Parliament “conservatively” projects India’s real GDP growth of 6.5-7 per cent for 2024-25, cognizant of the fact that market expectations are on the higher side. Real GDP growth is the reported economic growth minus inflation.