Rate hike cycle: Recent decline in inflation pose well for rate hike cycle. If rate hike cycle pause continues that we can see interest rate sensitive sector starts to pick up and sectors like NBFC, Auto, Real Estate and Capital Goods could be a big beneficiary.

Fund Flows: After reporting cumulative outflows between Oct’21 and Feb’23, FII flows bounced back strongly in the last four months, with cumulative inflows of USD 14b over Mar-Jun’23 while DII flows continued to remain positive at USD 4b during the same period. The recent recovery in FII flows has pushed the index to an all-time high level. As of CY23YTD, FII inflows stand at USD 9.7b whereas DIIs remain net buyers with inflows of USD 10.5b.

Discretionary consumption slow; housing demand continues to high: Retail discretionary demand continues to remain muted across industries, rise in interest rate is also a key reason for slowdown. However, interestingly housing theme continues to remain strong as unsold inventory is coming down in the system.

Power sector: India’s thermal power sector is set to enjoy a growth spurt in plant load factor (PLF) and demand in the 2024 fiscal year, projecting a 5.0-5.5% rise, according to rating agency ICRA. The country’s electricity demand and a clampdown on thermal capacity additions have been identified as growth drivers. On the renewables front, ICRA predicts capacity additions to leap from 15 GW in FY2023 to 20 GW in FY2024, spurred on by a ramp-up in tender activity and cost-reflective tariffs.