Two months after he got elected in November 2024, our annual edition of the Market Pulse finds US President Donald Trump to be a man on a mission as a befuddled world tries to make sense. To sample a few of the ‘America First’ policies that could have a global impact directly or indirectly, the US is no longer in the WHO or the Paris Accord, has initiated reviews on trade agreements with Mexico and Canada, and has threatened tariffs against multiple countries. The pressure felt by trading partners and the increased price levels would make it tougher for the Fed to bestow rate cuts on a slowing economy. To be sure, the long-term problems faced by the US economy are real enough. Corporate earnings have benefitted from the fiscal gap, but public debt has also risen significantly. Despite the strong growth trajectory since the pandemic, medium-term concerns on Chinese competition, reviving domestic manufacturing and blue-collar employment remain. The long-term impact of Shri Trump’s focus on aggressive protectionism using tariffs and other measures to reduce trade deficits, protect domestic industries and the resulting disruptions on the US economy remain uncertain, as does the response function of countries affected by them. Policy uncertainty is likely to be a recurrent theme in 2025.
All said and done, the US economy continues to differentiate itself from the rest of the developed world in terms of its growth trajectory for now, with a 2.7% growth rate in the third quarter of 2024. The IMF expects global growth to be 3.3% in 2025 and 2026, albeit with accommodative financial conditions and rising economic policy uncertainty.
Global equity markets overcame geopolitical tensions and high bond yields, delivering gains for the second straight year. The US led the way, with the S&P 500 rising 23.3?ter a 24% gain the previous year, buoyed by economic strength and AI optimism. Japan ranked as the second-best performer among large markets globally (+19.2%), supported by a weaker yen. Other developed markets, while positive, lagged US markets due to trade and political uncertainties. Overall, developed equities (MSCI World Index) rose 16.7% in 2024, following a 21.8% return in 2023, with optimism continuing into 2025 (+4% YTD as of January 24th, 2025). Emerging markets (EMs) faced headwinds from a strong dollar and trade issues after Donald Trump’s win but saw a 5.1% gain, mainly from China’s late-2024 rebound, with another 1.5% YTD gain in 2025. Global fixed income markets struggled in 2024 with fluctuating ratecut expectations shaped by geopolitical risks, inflation swings, and central bank policies. The US 10-year Treasury yield rose 71 bps to end at 4.6%, mirroring trends in the UK, EU, and Japan.
The year also saw Indian markets rise (+8.8% for the Nifty 50) for the 9th time in a decade, with market capitalisation at Rs439 lakh crore (US$5.13trn) on December 31st, 2024, up 21.5% in a year. This resilience, despite Q4 sell-offs and global challenges, was driven by strong fundamentals, policy continuity after the NDA’s third-term win, and domestic investor inflows offsetting significant foreign outflows. The Nifty 50 Index gained 8.8%, achieving an 11.1% annualized return over a decade, beating MSCI World (8.0%) and EM (1.2%) indices, but started 2025 on a weaker note (YTD: - 2.3%). Mid- and small-cap indices excelled, with 21.5% and 25.3% returns, respectively. Indian bond markets remained resilient, aided by sovereign bond inclusion, falling inflation, and proactive RBI steps, with the 10-year Gsec yield closing 42 bps lower at 6.76%.
The FPI selling that began in the 4th quarter on valuation and growth concerns has crossed levels seen in the first phase of the pandemic and continues for now, as growth indicators tapered in the second half of the year. Domestic investors on the other hand continued to buy the India story, with greater participation and capital investment through direct and indirect channels. Indian households saw their equity wealth across these channels rise by Rs 13 lakh crore in the year to Rs 77 lakh crore, as of December 2024. The last five years have been a total increase of Rs 43 lakh crore in household equity wealth.
The Indian economy stands at a crucial juncture entering 2025. Despite global issues like persistent geopolitical tensions, monetary shifts, and regional economic divergences, India remains resilient and retains its title as the fastest-growing major economy. Economic growth is forecasted at 6.4% for FY25 (FAE), with multilateral agencies projecting a similar pace in FY26, between 6.5% and 6.9%. However, the first half of FY25 witnessed sharper-thanexpected growth deceleration, driven by weakened industrial activity, muted government spending, and slower recovery in private investments. Following a challenging year, India’s economic outlook for the remainder of FY25 and FY26 hinges on recovering private consumption, delayed government expenditure, strong services exports, and a revival in private investments. Yet, uncertainties persist, including global volatility, precarious trade policies, intensifying climate risks, and rising input cost pressures. Our Story of the Month this time takes a detailed look at the macro and market trends in 2024, juxtaposing them with the past.
Household interest in equity in the post-pandemic era has steadily led to a rise in supply. Primary markets in India had a record year in more ways than one. A total of 301 listings raised Rs 1.67 lakh crore in IPOs–over 3x that of 2023–of which 90 were on the mainboard (avg. size Rs1772 crore), 178 SMEs (avg. size 41 crore) and another 33 direct listings. Hyundai Motor’s Rs27,859 crore IPO was the largest ever in India and the second largest in the world last year. Adding Follow-on issues, total equity raised was Rs4.27 lakh crore, significantly higher than the Rs1.85 lakh crore raised in 2023. Combining debt, equity and trusts, the total capital raised in 2024 of Rs 17.92 lakh crore was 32% higher than in 2023. The number of mutual fund holders crossed 5 crore in the year, with SIPs totaling over Rs25,000 crore in many months of 2024; equity AUM of domestic mutual funds crossing Rs 39 lakh crore, ~20% of it passively managed.
The number of unique investors at the NSE rose to 11 crore earlier this month, marking a seven-fold increase in the last decade, with over 21 crore accounts and over 18 crore demat accounts. The last two crore members of the investor community came in just over five months for each crore. 2024 saw 2.32 crore new investors, the highest ever.
A fifth of Indian households have a link to the markets, today, as the market capitalisation of Indian companies has increased 6x in this period. The median age of the Indian investor is 32 years, with over 40% of them under the age of 30, and one in four investors today is a woman. State-wise, Uttar Pradesh surpassed Maharashtra in new registrations last year, adding 33 lakh (+14.4%) investors; both remain the only states with over a crore investors.
Peter Drucker once said, “Culture eats strategy for breakfast.” We have written earlier about a similar relationship between geopolitics and macroeconomics. As we enter 2025, the war in Gaza has seen a ceasefire after more than a year, with a substantial change in the balance of power in the Middle East. The Russia-Ukraine war goes on for now and among the numerous points made by the US recently is an offer for Canada to become the 51st state, and a serious demand for the Panama Canal and Greenland. Global markets in the new year must contend with a US President determined to make the most of the majority his party currently enjoys. Indian markets have potentially slowed growth to add to the global uncertainties, even as it remains the fastest-growing large economy. The IMF lists economic (trade, fiscal) policy uncertainty as one of the risks in 2025, in its latest World Economic Outlook.