'Indian stock market outperforms the global market, makes for attractive investment'

livemint.com:

global market. MSCI 1-month’s return is 8.0% compared to MSCI World’s 5.2%, 1Yr is 12% vs 13.8%, respectively. This favourable outcome positions India attractively, fostering expectations of an enticing domestic pre-national election rally in anticipation of sustained reforms and policies.

Such a scenario serves as a key attraction for foreign funds, encouraging them to maintain a positive outlook on the country. Simultaneously, globally, risk-on strategies are gaining momentum in anticipation of the apex of the interest rate cycle. The Fed is expected to make its first cut between March to June 2024, a consensus view.

And currently, the bond yield from a high of 5% (US10yr) has corrected to 4.18%. This downward trend in yields is anticipated to persist in the short to medium term, propelled by expectations of easing inflation, geopolitical risks, and an impending economic slowdown. In light of the current dynamic, a positive trend is evident in both global and domestic markets.

However, it's crucial to acknowledge the flip side of the coin, as complete resolution may not be imminent. On the international front, the expectation is that the decline in bond yields may not be a prolonged phenomenon. This is because inflation is still expected to stay above the long-term trend in CY2024 due to high fiscal and consumer expenditures.

The current consensus is that US CPI will drop to 2.4% in Q4CY24 from the current 3.2%, which will help bond yield narrow further. However, the extent of further downfall will be muted as economists forecast the average 10yr yield to be 3.9% in 2024. This stems from the fact that the CPI forecast remains elevated compared to the long-term average and the FED's target of 2%.