Domestic equity markets continued to outpace most of the other large equity markets globally in 2023. The outperformance came on the back of robust inflows by domestic investors that aided the benchmark equity indices to scale their new record highs in 2023 despite global uncertainties.
Will the ongoing performance of the Indian equity market continue in 2024? And, which stocks will deliver solid returns to investors going ahead? Sunny Agrawal, Head of Fundamental Equity Research, SBI Securities in an interaction with Business Today said that the Indian equity market to remain buoyant in 2024 and Nifty50 is likely to further deliver an 8-12 per cent return over the next 6-12 months.
The 50-share Nifty index has gained over 17 per cent on a year-to-date (YTD) basis till December 21, 2023. On the other hand, the Nifty Midcap 100 and Nifty Smallcap 250 indices have rallied 42 per cent and 44 per cent, respectively, YTD.
Commenting on the ongoing rally, Agrawal added that post outcome of the five state assembly elections, the street is discounting that the existing ruling party is likely to win the ensuing general election with a thumping majority, thereby ensuring political stability and continuity in government policies.
He also added that with dovish commentary coming from the US Fed governor, the market is also expecting three rate cuts to the tune of 75 basis points in 2024.
“Going forward, we expect global fund managers to shift the funds from safe-haven assets like US bonds and chase riskier assets like emerging markets (including India) and commodities. Hence, Indian equity markets are likely to witness a liquidity tsunami from foreign institutional investors (FIIs) coupled with domestic institutional investors (DIIs) and retail or high net worth investors sitting on the fence,” Agarwal said.
Data available with Ace Equity showed that FIIs have poured Rs 1.64 lakh crore so far in the domestic equity markets in 2023 till December 21. On the other hand, DIIs have bought shares worth Rs 1.78 lakh crore during the same period.
From the valuation perspective, the market watcher believes that Nifty50 is trading at FY25 P/E multiple of 19.1 times, which is neither cheap nor expensive.
“With markets at a time high, investors are recommended to adopt the “Buy on dips” strategy with a focus on rate-sensitive sectors like BFSI, auto, real estate etc. In addition, sectors such as cement, engineering or capital goods, infrastructure, railways, defence, renewables, IT and biofuels can also be on the radar,” he said while adding that risk-reward looks favourable in large caps as compared to small and midcaps at present.
“In small and midcaps, investors should look for bottom-up growth stories in the companies where the capex cycle has recently completed or is on the verge of completion and there is robust demand visibility for the product/services,” Agarwal further stated.
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