The themes we would like to invest in during the current environment are largely domestic-facing sectors, such as Capex in the power sector, industrials, capital goods, and telecoms, due to robust domestic tailwinds. We also favor the “Make in India” stories in chemicals and healthcare, despite the possible increase in tariffs from the US in the future.
The year 2024 has been good for global equities but not so favorable for bonds.
The MSCI World Index grew by an impressive ~18%, with the NASDAQ increasing by a mammoth ~32%, and China growing by 25%, beating the MSCI India Index, which grew only ~13%. However, the Indian Small Cap Index grew 30%, in line with the NASDAQ, followed by the Mid Cap Index, which grew 28%. Indian Large Caps were the underperformers, growing by only 10%.
The US 10-year yields moved up 70 bps from 3.9% to 4.6%, driven by expectations of fewer rate cuts in the future and possibly higher inflation due to increased tariffs. This contributed to the underperformance of the global bond market.
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