investment viewpoints

India in 2024: a trio of new positive catalysts

India in 2024: a trio of new positive catalysts
June Chua - Portfolio Manager, Asian equities

June Chua

Portfolio Manager, Asian equities
Faye Gao - Senior Analyst and Junior Portfolio Manager

Faye Gao

Senior Analyst and Junior Portfolio Manager
Ashley Chung - Senior Analyst and Junior Portfolio Manager

Ashley Chung

Senior Analyst and Junior Portfolio Manager

2024 will undoubtedly be a year of weaker global growth, largely led by the US and China. Yet we believe the combination of 1) a US soft landing, 2) slowing global inflation and 3) global monetary easing will mean riskier assets perform better. We believe strong returns are possible for Asian equities, especially when GDP growth projections are much higher for Asia ex Japan than for developed market peers.

As we look into 2024, we like countries with the best macro outlooks. One of our strongest convictions is India, the subject of the first insight in our four-part series on our 2024 outlook for Asia equities.

  • In 2023, India became the world’s fifth-largest equity market behind the US, China, Japan and Hong Kong, with its market cap surpassing USD 4 trillion. We believe that India is a long-term structural story and that 2024 should bring three positive catalysts to its equity market. The first two are macro-related and the third is political.

    Firstly, a well-supported currency. The INR was solid in 2023 (practically stable), as the central bank kept interest rates high, rebuilt foreign exchange reserves to a level just 6% shy of all-time highs and tamed core inflation from a starting point of 6.5% in January to 4.5% in November. In 2024, the expected soft landing in the US will mean Federal Reserve rate cuts and continuing soft oil prices. Both of these factors will be incrementally supportive for the INR. Additionally, the inclusion of Indian government bonds in the JPMorgan EM index by June of this year should lead to an estimated USD 30 billion of inflows, equivalent to just under half a month of imports.

  • Secondly, the long-awaited rural recovery should take shape in 2024. The rural economy accounts for at least one third of India’s GDP. It was weakened in the last two years by rising interest rates draining liquidity, in conjunction with high inflation. Lower rates kicking in, likely after Q2 2024, will help liquidity, while the inflation shock is being digested. Mass market FMCG companies, which are typically 35-50% exposed to rural markets, currently indicate that rural weakness has stabilised, although it has yet to show decisive improvement.

    The runup to national elections in May 2024 may well include some handouts in rural areas, which would boost rural consumption. Consumer confidence indicators in recent months already showed continuous progress, which bodes well given that private consumption accounts for close to 60% of India’s GDP. In early December, the RBI upgraded its 3/24 real GDP growth forecasts from 6.5% to 7%, and Q1 25 (ending June 2025) forecasts from 6.6% to 6.7%.


    FIG 1A. India Core CPI tamed in 2023 & FIG 1B. Consumer Confidence surpassed pre-Covid 2019 levels

    Source: Bloomberg & Source: RBI.

  • On the political front, a third mandate for the Bharatiya Janata Party (BJP) looks increasingly likely and would support equity markets. Elections in five States in late November, representing one-sixth of Indian voters, produced a favorable outcome for the BJP, which won in three of the four key States by an unexpectedly wide margin and a considerable increase in seats. From the perspective of households, corporates and markets, a continuation of the current administration would be positive, given the structural reforms, increased capex and geopolitical strength the government has secured for India in the last decade.

    On the capex front, in particular – although we may witness a temporary slowdown in the coming months as some resources are channeled into short-term measures aimed at winning votes – we believe core investments in road infrastructure, railways, electrification, PLI, etc., are non-reversible and will underpin growth in the next term.


    TABLE 3. Election results


    Madhya Pradesh




    Additional seats won by BJP vs 2018 election





    Total BJP seats





    Total assembly seats





    Source: Election Commission of India.

  • In addition to the above new catalysts, there are existing factors that should continue to drive equity market performance:

    1. Foreign flows into the PLI scheme (reducing India's import dependence and relocating global export manufacturing to India from China) are well-documented and continuing. One aspect is India’s cost advantage, which we don’t expect to come under pressure: companies in labor-intensive segments like property development or electronics-manufacturing services are very comfortable with the labor supply, according to our research. Workforce quality also appears adequate: our November on-the-ground visits of a semiconductor and an auto plant in Chennai left us impressed with the factories’ efficiency, and with the high degree of local staff including at management level, suggesting scaling up is achievable. The Industrial sector performed strongly in 2023 (up 26% versus 15% for MSCI India), and we expect EPS growth for a number of industrial companies to surpass 20% CAGR in the next couple of years.
    2. The government also continues to provide support by reducing friction at different levels of the economy. An example is in logistics: the last section of the Delhi-Mumbai expressway, opened in October, has cut transport time to 10 hours, one of numerous initiatives in road/rail/air to lower logistics costs as a percentage of GDP. Anecdotally, a diagnostics lab chain told us that increased flight frequency allows them to fly samples of increasingly complex tests from Africa into their Mumbai central laboratory. High-end hotel chains reported that they were actively looking to expand the land bank around Delhi airport. The government also seeks to increase online adoption and boost the portion of the population involved in online commerce from 6% currently to a target of 75%. To this end, the government created the Open Network for Digital Commerce (ONDC), an open and free platform connecting merchants and buyers. ONDC had a merchant base of 235,000 in December. As a reminder, the UPI (unified payments interface) or free instant payment system through mobile launched by authorities in 2016, now captures over 75% of all digital transactions in India. Finally, with a view to stimulate credit growth and financial inclusion, the RBI has authorised the consent-based sharing by licensed entities of consumers’ financial data, via an Account Aggregator network. To date, eight of India’s top banks have joined this network. 


    FIG 2. Manufacturing wages 2022, USD / hour

    Source: Euromonitor, World Bank, ILO, UNIDO, Morgan Stanley Research


    3. Foreign investor exposure to India is not excessive. ­Foreign Institutional Investors have been surprisingly absent from India in the last four years, with negative net inflows. This is despite the Indian equity market’s 49% appreciation in USD terms over the same period and India’s weight in Asian indices increasing meaningfully to almost 20%. Domestic flows have been strong, spurred by the SIP (Systematic Investment Plan), which channels the public’s savings into mutual funds and currently accounts for slightly under 15% of total volumes traded per month. The success of IPOs in different sectors in the last three months (e.g., Tata Technologies, Honasa, Cello, Flair)1 and of various block placements (e.g., Zomato, Sterling Wilson1) can partly be explained by these factors. We expect a number of IPOs, namely in the online space, in the next couple of years.  


    FIG 3. FII inflows 2023 were concentrated in Q2 and only slightly net positive in H2

    Source: Nuvama Alternative & Quantitative Research; Bloomberg.

  • We see upside potential in the three core areas of consumer, banks and manufacturing, which account for the bulk of Asia High Conviction’s exposure going into 2024.

    We expect consumer discretionary spending to stay robust in 2024. The wealthiest 100 million individuals who pay taxes (80 mn), use a credit card (80 mn), own a passport (over 90 mn), or use asset management services (over 35 mn) have low sensitivity to pricing as supply of higher-end goods and services remains lower than demand. The property market continues to strengthen in volume with healthy price increases; SUVs make up a growing share of the auto market; and hospital chains report patients are increasingly upgrading to private rooms, helped by the expanding penetration of insurance coverage.

    Beyond the post-Covid reopening, which has clearly spurred travel, hotel chains sound confident in their ability to raise Average Daily Rates due to limited supply, particularly at the high end. Although we find mass consumer names less attractive, it is interesting to see FMCG companies develop a more polarised offering with higher-end products able to command higher ASP, while also developing more value-for-money products. 

  • Loan growth was strong in 2023 and should remain solid in 2024, in our view. Banks underperformed in 2023 on concern about lower asset quality and for idiosyncratic reasons (e.g., HDFCB and HDFC’s lengthy merger1). In spite of RBI’s prudent step to increase risk weight on consumer loans by 25% in November (back to 2019 levels), which led Pay to lower its growth guidance, we understand from other large robust banks that loan growth has not been materially impacted and expect them to take market share.

  • We expect growth rates of 20% or more in areas like cables and wires, lighting equipment, cement for infrastructure and electronics manufacturing. ER&D (Engineering Research & Development, i.e., the designing and developing of devices, assembly processes or applications through software) is also a promising segment, where Indian companies can offer solid technology and affordable labor to large international industrial groups.

    Although Indian equity valuations are close to all-time highs, our Asia High Conviction strategy is currently overweight India2. We acknowledge there could be a risk of consolidation in the next few months, on any negative headlines pertaining to elections or to slowing of capex ahead of this. The risk of a US hard landing is currently not priced in by the market and has arguably been reduced by the Fed’s more dovish stance in mid-December.

    Although India’s economy is heavily domestic, exports of goods and services account for over 20% of GDP (e.g., IT Services), hence a US hard landing might shave some 100bp off the expected 6.6% GDP growth in 2024. This would impact job creation and be a setback for mass consumption. Unless the likelihood of such a scenario increases, we would probably use the opportunity of any market consolidation to add. 

In summary, we expect 2024 will be a year of slower global growth. Even so, we believe a combination of factors have brightened the outlook for riskier assets.  Our view is that one of the best-performing assets at the end of the tightening cycle will be the cycle’s laggards – Emerging Equities.

We advocate our view with a preference for large, domestic-driven markets like India, where a slowdown in global growth would have less impact.



[1] Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or securities.
[2] Allocations are subject to change.

important information.

For professional investor use only

This document is issued by Lombard Odier Asset Management (Europe) Limited, authorised and regulated by the Financial Conduct Authority (the “FCA”), and entered on the FCA register with registration number 515393.
Lombard Odier Investment Managers (“LOIM”) is a trade name.
This document is provided for information purposes only and does not constitute an offer or a recommendation to purchase or sell any security or service. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful. This material does not contain personalized recommendations or advice and is not intended to substitute any professional advice on investment in financial products. Before entering into any transaction, an investor should consider carefully the suitability of a transaction to his/her particular circumstances and, where necessary, obtain independent professional advice in respect of risks, as well as any legal, regulatory, credit, tax, and accounting consequences. This document is the property of LOIM and is addressed to its recipient exclusively for their personal use. It may not be reproduced (in whole or in part), transmitted, modified, or used for any other purpose without the prior written permission of LOIM. This material contains the opinions of LOIM, as at the date of issue.
Neither this document nor any copy thereof may be sent, taken into, or distributed in the United States of America, any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a United States Person. For this purpose, the term "United States Person" shall mean any citizen, national or resident of the United States of America, partnership organized or existing in any state, territory or possession of the United States of America, a corporation organized under the laws of the United States or of any state, territory or possession thereof, or any estate or trust that is subject to United States Federal income tax regardless of the source of its income.
Source of the figures: Unless otherwise stated, figures are prepared by LOIM.
Although certain information has been obtained from public sources believed to be reliable, without independent verification, we cannot guarantee its accuracy or the completeness of all information available from public sources.
Views and opinions expressed are for informational purposes only and do not constitute a recommendation by LOIM to buy, sell or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change. They should not be construed as investment advice.
No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorised agent of the recipient, without Lombard Odier Asset Management (Europe) Limited prior consent. In the United Kingdom, this material is a marketing material and has been approved by Lombard Odier Asset Management (Europe) Limited  which is authorized and regulated by the FCA.

© 2024 Lombard Odier IM. All rights reserved.