Is it going to be a Happy New Year for Indian equities? Read on

It is only going to get better for Indian equities in 2024 after a breakout 2023 that saw the bourses closing out a record eight-year winning run.

Investors added a whopping Rs 81.90 lakh crore to their wealth this year riding on a raft of positive factors including India's strong macroeconomic fundamentals, political stability owing to BJP's success in the recent state elections, optimistic corporate earnings outlook, and signals from the US Federal Reserve about three prospective rate cuts next year. 

So where does Dalal Street go from here?

Seven out of the 10 fund managers and strategists, as per an informal Bloomberg survey, see the NSE Nifty 50 Index rising in 2024. While two forecast a gain in excess of 10%, two see a drop. 

The benchmark has risen 20% this year, beating MSCI’s Asia Pacific and emerging markets indexes. The run puts Indian market value above $4 trillion for the first time, amid concerns over the outlook for its biggest rival, China.

“Multiple tailwinds” should benefit Indian stocks, including PM Modi's infrastructure push and diversification of supply lines beyond China, Arun Chulani, emerging market strategist at First Water, was quoted in a Bloomberg report. “All this should mean that there will be significant opportunities for wealth creation.”

Strategists in the survey pointed to inflows from overseas investors, who have bought over $20 billion worth of local stocks on a net basis so far this year, reversing a record withdrawal in 2022. Growing appetite for stocks among domestic retail investors was also seen as another positive for the market in 2024. Mutual funds investments surged 28% from a year ago in November, according to data from the Association of Mutual Funds in India.

Earnings for Nifty 50 companies are projected to rise about 15% in 2024, marking a fourth-straight year of double-digit profit growth, according to Bloomberg.

Infrastructure firms and the information technology sector look primed for gains in the new year. Valuation, however, is an area of concern with Nifty 50 trading at 20.2 times estimated earnings, compared with a 10-year average of 17.6 times.