One PMS fund manager has forecast a target of 23,000 for Nifty by the time of general elections, but also anticipates a possible correction post-elections
India’s blue-chip Nifty 50 and BSE Sensex rose around 20% in 2023, their second-best year since 2017, and were among the top-performing stock indexes globally. Nifty rose 3,600 points to reach 21,800-mark while Sensex rose 11,000 points during 2023 to surpass 72,000-mark.
The rally was driven by sustained domestic mutual fund inflows, return of foreign buying, better-than-expected economic growth, and healthy corporate earnings.
Foreign portfolio investors (FPIs), who were net sellers of Indian shares in 2022 as global central banks hiked rates, returned to buying in 2023.
The broader small- and mid-caps gained about 55.62% and 46.57% in 2023, far outperforming the blue-chip indexes despite valuation concerns. Will the euphoria continue in 2024? A few market experts weighed in on this all-important question for traders and investors.
Sonam Srivastava, Founder and Fund Manager at Wright Research, PMS
In 2024, Indian market trends are expected to be cautiously optimistic, according to fund managers. They foresee a continuation of the bull run, albeit at a more measured pace than in 2023, driven by factors like a robust domestic economy, strong corporate earnings growth, and attractive equity valuations. India’s GDP is anticipated to grow at 6.5%-7% in FY24-25, buoyed by domestic consumption and government spending.
Key sectors to watch include technology, financials, and consumer staples, alongside emerging sectors like battery energy storage, green hydrogen, biotechnology, AVGC, and semiconductor manufacturing. However, challenges such as global inflation, geopolitical tensions, and the 2024 general elections may pose risks to market stability. Fund managers advise investors to focus on quality companies with solid fundamentals, maintain a diversified portfolio, and stay disciplined in their investment strategy, while also consulting with financial advisors for tailored investment plans.
Anirudh Garg, Partner and Fund Manager at Invasset PMS
As we step into 2024, under the strong governance of the BJP government, the market is anticipated to enter a phase marked by higher valuations. Despite this, the underlying positive trend is expected to persist for the next two years, interspersed with significant corrections and sharp rebounds.
This period is identified as an ‘old economy run’, with a focus on sectors like railways, defence, infrastructure, PSU, and PSU banks. This thematic emphasis on capital goods is seen as a continuation of the current growth trajectory. There’s a prediction that if there is a sharp market rally leading up to the elections, we may witness the market entering an expensive phase, likely setting the stage for corrections. If, however, the market does not experience such a rally, it is expected to continue its normal course.
Regarding the Nifty index, Invasset PMS forecasts a target of 23,000 by the time of the elections, but also anticipates a possible correction post-elections. This expectation is based on the market adage of “buy on hope, sell on confirmation.” During this rally, large-cap stocks are expected to perform well alongside mid-caps. However, the focus on value in the old economy suggests that mid and small-caps would not underperform their large-cap counterparts. Interestingly, large-cap stocks that have been dormant over the past year are also expected to start participating in the rally.
We advise that the current market scenario presents a favourable investment opportunity. However, as the market rises in the coming 2-3 months, investment strategies may need adjustment. Investors are cautioned against the pitfalls of greed and fear, emphasizing the importance of continued investment.
In summary, the market outlook for 2024 is cautiously optimistic, with an emphasis on specific sectors driven by the old economy. While there are expectations of higher market valuations and potential corrections, the overall trend remains positive, offering opportunities for both large and mid-cap segments. Investors are encouraged to stay vigilant and adapt to the evolving market landscape.
Divam Sharma, founder and Fund Manager at Green Portfolio, PMS
2024 we expect a pre-election rally as markets are factoring a high likelihood of continuity of existing government in the center. We also would have a budget that should showcase the continuity of growth plans despite being a pre-budget.
Near elections, we expect volatility in the markets while we also could see the Fed beginning to cut interest rates. This period could witness some profit booking as historically we see markets correcting when the Fed starts the rate cut cycle. The next event for the markets would be the US elections later in the year which will keep markets busy.
We expect the laggards’ sectors like Pharma, Chemicals, and Textile to perform in 2024 as we see a cushion of valuations and turnaround indications over the coming quarters. It should be a stock-specific market with a focus on growth companies. We expect the FIIs to pump money into Indian markets in the first half of 2024.
Anil Rego, Founder and Fund Manager at Right Horizons, PMS
Indian economy is at a long-term secular megatrend where its relationship with the historical is being muddled with distinct secular drivers creating inflexion that is of greater prominence for the current investment landscape. The risks to the macro are skewed towards the global slowdown, spiking oil prices and geo-political mayhem that seed intermittent periods of volatility in the Indian equities market.
The foundation for our optimism lies in the narrative that India is advancing globally positioning itself as the fastest-growing major economy. GDP growth during the first half of FY24 has been robust exceeding expectations. Earnings in H1FY24 have been healthy and we anticipate robust annual earnings growth over the next three years, driven by multi-decadal growth outlook for the economy, healthier corporate balance sheets, an expanding capex trend focused around infra, a multiyear credit cycle for financials, a structural increasing trend in discretionary consumption and a dependable reservoir of domestic capital.
Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS
2023 was an astounding year for Indian equities. The year started on a challenging note, but the situation eased with the year’s passing as the challenges of further rate hikes reduced while corporate earnings remained resilient. The year saw risk-taking reap huge rewards, and PSUs registered another spectacular year. 2023 will end on a very strong note with solid market performance backed by consistent improvement in the profitability of Indian corporates. 2024 will be an interesting year as developed economies are likely to slow down, but challenges of rate hikes are unlikely. The year could see the Federal Reserve cutting interest rates by mid-year, which will help the equity markets. However, elections in India and the US elections are likely to result in higher volatility, which means reduced market breadth and focus shifting to liquidity and quality management within the portfolio. Overall, it is a good time to take some profits in small caps and deploy in quality large caps and quality PSUs.
Murthy Nagarajan, Head-Fixed Income, Tata Asset Management
In the wake of the tumultuous events in the debt market last year, characterised by the unsettling failures of US banks and subsequent rate hikes by the Federal Reserve, the global economic landscape remains resilient. The US Federal Reserve’s strategic response to enhance liquidity and the ongoing strength of the broader US economy have instilled confidence. Meanwhile, India’s trajectory mirrored the US, with the Reserve Bank of India tactically managing liquidity amidst changing global dynamics. As inflation expectations moderate in both nations, the prospect of rate cuts emerges, presenting a positive outlook for the bond markets. The anticipated FII buying, government spending, and RBI interventions signal a promising year ahead. In this intricate dance of economic variables, market participants can find solace in the potential for higher accrual and capital appreciation, ushering in a period of optimism and stability in the bond markets.