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:

Sonam Srivastava of Wright Research advised investors to concentrate on the U.S. Federal Reserve’s interest rate policies, corporate earnings, and geopolitical tensions, particularly in the Middle East, as these will shape market conditions. Domestically, GDP growth, inflation trends, and fiscal policies are essential in setting market sentiment. Diversified portfolios, she suggested, can help investors navigate these evolving macroeconomic trends. Investors are advised to maintain a diversified portfolio, stay informed about macroeconomic trends, and be prepared to adjust strategies in response to evolving conditions.

Jathin Kaithavalappil of Choice Broking underscored that investors should begin to pay attention to important macro events like the expected inflation data, Fed and RBI meetings (25 bps cut expected), as well as the economic developments in China. American inflation figures and verbal interventions of the Fed will create the landscape for interest rate projections, whereas relatively low Q2 profit rises and conservative predictions for H2 require an emphasis on blue chips and defensive plays in a high equity valuation environment.

Riya Oswal Bafna of Purnartha PMS pointed out that Trump’s return to the White House created temporary market volatility amid a strong dollar. The focus, she stated, would be on the extent of protectionist policies in 2025. In the meanwhile, on the domestic front, it is important to watch RBI’s stance on rate cuts in the next monetary policy, as we see the dollar getting stronger and the rupee depreciating. A weaker rupee has historically been a strong case for the RBI to reduce rates. The double whammy seems to be inflation breaching its tolerance levels. So, the December policy would be important to watch out for the quantum of rate cuts, as RBI has refrained from cutting rates in the previous policy.

Aman Soni of Prudent Equity remarked that while political developments are critical, the profit growth of companies should remain the focus. Despite potential volatility from policy shifts, he advised investors to centre their strategies on fundamentals to drive long-term portfolio performance.

Ravi Singh from Religare Broking Ltd. noted that now that the U.S. elections are over, investors are turning their attention to key market dynamics expected to shape the remainder of the fiscal year. Singh highlighted the Federal Reserve’s rate stance as a major driver, impacting interest-sensitive sectors like tech and finance. Additionally, India’s 2025 Budget could be pivotal in influencing market expectations and growth. Furthermore, global events remain under a close eye, with factors like supply chain volatility and energy price fluctuations poised to influence market stability. Singh recommended a strategic approach focusing on resilient sectors amid global supply chain disruptions and fluctuating energy prices.

Trivesh from Tradejini echoed these sentiments, further stating that with the U.S. elections wrapped up, investors should keep an eye on potential shifts in economic policy, like interest rate hikes and a stronger dollar. These moves could lead to capital flowing out of emerging markets like India, pushing up borrowing costs. But let’s not forget, India’s strong foreign exchange reserves and historical resilience have always helped it weather external shocks. Just think back to past election cycles: after the 2016 U.S. election, Nifty climbed from 8,400 to 10,400, by 2017 and following 2020, it surged from 12,600 to 18,000 in year time.

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.