What’s next for investors after US elections? Here are key trends that could shape final days of 2024

The Indian market is currently undergoing a corrective phase, impacted by the rise in the dollar index following Donald Trump's victory in the 2024 US Presidential elections. Continuous outflows from foreign investors and the Middle East crisis are also aiding the negative sentiment.

The benchmark Nifty has lost over 11 per cent from its record high of 26,277.35, hit in September last year. It has shed 3.5 per cent in November so far after a 6.2 per cent crash in October.

Just in today's deals, the Sensex fell as much as 615 points or 0.8 per cent to its day's low of 76,965.06. Meanwhile, Nifty declined 182 points or 0.8 per cent to its day's low of 23,350.40. Today is the seventh straight session of losses for the Indian markets.

With the US elections now over, attention has turned to a blend of domestic and global economic factors that can influence market dynamics. Experts weigh in on subdued earnings growth, anticipated rebounds, and the potential impact of global policies on Indian markets. From inflation data to upcoming monetary policy decisions, the landscape is poised for strategic reassessment.

Here's what they expect markets to focus on next:

US Federal Policies and Global Geopolitical Tensions

Sonam Srivastava of Wright Research advised investors to closely follow the U.S. Federal Reserve’s interest rate decisions, corporate earnings, and geopolitical developments, particularly in the Middle East, as these will significantly influence market conditions.

Ravi Singh from Religare Broking also stated that with the U.S. elections behind, attention has shifted to critical market drivers that will shape the rest of the fiscal year. He identified the Federal Reserve’s interest rate stance as a significant factor affecting sectors like technology and finance.

Inflation Data and Economic Developments in China

Jathin Kaithavalappil of Choice Broking emphasized the importance of focusing on upcoming macroeconomic events such as the anticipated inflation data and key central bank meetings, including the Federal Reserve and RBI. He noted that the RBI’s potential 25 basis point cut, coupled with developments in China’s economy, could shape market dynamics. Kaithavalappil underscored that U.S. inflation figures and statements from the Fed would create the framework for future interest rate expectations. Given relatively low Q2 profit growth and conservative projections for the second half of the year, he advised investors to prioritize blue-chip and defensive stocks in an environment marked by high equity valuations.

Donald Trump’s Return

Riya Oswal Bafna of Purnartha PMS highlighted how Donald Trump’s return to the White House had triggered temporary market volatility amid a strengthening U.S. dollar. She suggested that investors focus on the possible extent of protectionist policies in 2025.

Domestic Macro Factors

Srivastava of Wright also pointed to GDP growth, inflation trends, and fiscal policies as essential drivers of market sentiment. Srivastava highlighted the importance of maintaining a diversified portfolio to help investors navigate these evolving macroeconomic challenges. She recommended that investors remain informed and agile, ready to adjust their strategies as conditions change.

Bafna of Purnartha PMS further stated that the RBI’s upcoming policy stance on rate cuts is critical, particularly as the rupee continues to depreciate. A weaker rupee has historically encouraged the RBI to lower rates. Bafna pointed out that inflation breaching its tolerance levels adds to the complexity, making the December monetary policy crucial for assessing potential rate cuts after a pause in the previous session.

Prioritizing Profit Growth Amid Policy Shifts

Aman Soni of Prudent Equity emphasized the importance of focusing on company profit growth, even as political developments contribute to potential volatility. He advised that despite policy changes, investors should center their strategies on fundamental analysis to support long-term portfolio performance. Soni noted that while political events could sway short-term market movements, strong corporate earnings would remain a key factor in driving sustained investment success.

India’s 2025 Budget

Ravi Singh from Religare Broking added that India’s 2025 Budget was highlighted as a potentially pivotal event that could influence market expectations and growth prospects. Singh also noted that global supply chain disruptions and energy price fluctuations would continue to pose challenges, advising a strategic approach focused on resilient sectors amid these uncertainties.

Emerging Markets and India’s Resilience

Trivesh from Tradejini echoed similar sentiments, pointing out that investors should be mindful of possible economic policy shifts, such as interest rate hikes and a stronger dollar, which could result in capital outflows from emerging markets like India and higher borrowing costs. He added that India’s strong foreign exchange reserves and historical resilience have enabled it to withstand external shocks in the past. Trivesh recalled instances like the 2016 U.S. election, after which the Nifty surged from 8,400 to 10,400 within a year, and the post-2020 surge from 12,600 to 18,000, showcasing the market’s capacity for recovery and growth.

The interplay between domestic earnings growth and global economic shifts will dictate market trends as the year progresses. While government spending and strategic budget initiatives are expected to support recovery, geopolitical uncertainties and inflation concerns may pose challenges. Investors are advised to focus on resilient sectors and blue-chip stocks while preparing for potential policy-driven market adjustments.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.