Macro Economic Outlook - December 2024: IIFL Capital

19 Dec 2024 , 04:30 PM

Macro Economic Outlook – December 2024: IIFL Capital

The inflation is expected to come down globally and lower rates led by the Federal Reserve, central banks of other countries including India. On December 18, the FOMC cut its benchmark lending rate by 25bps, therefore, benchmark rate is now at 4.25-4.50%.

In the US, Donald Trump has been elected as new president and the global macro economy is no longer the same. DXY, bitcoin and US bond yields are going up. Also, the chances of trade war between China and the US are high.

Once Trump joins the office, the odds to impose import tariff of upto 60% of Chinese goods, as proposed are high. In response, China may consider to devalue the Yuan. This could lead to other emerging markets to devalue the currency, potentially triggering a currency crisis.

Indian Economy:

Q2 GDP growth is two-year low of 5.4% in July-September quarter against 8.1% in the same period last fiscal. At the same time, manufacturing hits worst and grew only 2.2% versus 7.7% in Q1. However, the agri-sector recovers due to above-normal monsoon and grew 3.5% against 2% in Q1.

Private Final Consumption Expenditure (PFCE) increased by 6.0% in Q2, up from 2.6% in the same period last year. The services sector showed strong growth at 7.1%, with trade, hotels, and transport segments contributing 6.0%. While mining and quarrying saw a slight contraction of 0.1%.

According to analysts of IIFL Capital, the liquidity conditions may remain tight in 2025 and more interventions from RBI in forex market may follow. However, the kharif harvest is going to be good and food inflation should come down.

The Trump administration plans to cut taxes and introduce significant deregulation shortly after taking office. This may further could trigger FII outflows as the new US government assumes charge.