Sensex, Nifty 2024 outlook, stock market strategy, key factors to watch & more

Benchmark stock indices Sensex and Nifty hit record highs in 2023, with the BSE barometer zipping past the 72,000 mark and the NSE benchmark topping the 21,600 level. With this, the Nifty50 has jumped 18.62 per cent for the year while the Sensex has risen 17.4 per cent. But if one were to go by analysts, the year 2024 could see these indices making new highs. In fact, attractive valuations may help largecap stocks outshining midcap and smallcap peers in the coming year, analysts said. 

To be sure, despite 18 per cent surge in 2023, Nifty is trading at a 12-month forward PE ratio of 19 times, which is at a discount to its 10-year average of 20 times.  

In 2024, a few events would influence the domestic stock market. They include Lok Sabha elections in May and the first Union Budget post elections. While on the global front, factors such as Fed rate cut, inflation, geopolitical issues and the US elections, would be keenly watched.

"Calendar 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 US Fed cutting interest rates by mid-year, which will help 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," said Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS. 

Kulkarni said it is a good time to take some profits in small caps and deploy in quality large caps and PSUs. ICICIdirect has a target of 24,200 on Nifty. Seasoned investor Vijay Kedia in a recent interaction with Business Today suggested a Sensex target of 80,000 by December 2024.

Sampath Reddy, Chief Investment Officer at Bajaj Allianz Life Insurance said the domestic economic growth may remain robust in 2024, supported by domestic consumption, government spending, and a gradual recovery in private investments. 

"While uncertainties like global interest rates, volatile crude oil prices, and upcoming domestic elections remain, the Indian growth story continues to be compelling, offering investors significant potential for wealth creation over the long term,” he said.
Jitendra Gohil, Chief Investment Strategist at Kotak Alternate Asset Manager noted that FPI holdings in domestic stocks is at a 10-year low and potential foreign buying in the debt market ahead of India's inclusion in the JP Morgan Emerging Market Government Bond Index, may provide some stability to the rupee. 

"While it seems that the market has priced in most of these near-term positives, we expect Nifty to return high single-digit gains in 2024. Risk-reward ratios favour large-caps over mid & small-caps currently, and PSUs still have potential for outperformance, in our view," Gohil said. 

This analyst is constructive on banks, select NBFCs, real estate and pharma stocks. Investors with a long-term horizon can start accumulating chemicals and IT stocks on dips, Gohil said. 

"India remains a shining star and is expected to maintain its outperformance. We expect market sentiment to strengthen further as the ongoing pre-election rally is likely to continue. Any rate cut would provide additional boost to the market. Given the government’s focus approach towards long-term capex across key areas, along with expectations of rate cuts globally in 2024, growth stocks will be in focus," said Motilal Oswal Broking and Distribution.

This brokerage expects Industrials, real estate, BFSI, auto and consumer discretionary sectors to do well going forward. "We believe that over the next couple of quarters, sector rotation could be an important driver along with the overall market uptrend. We also believe valuations will become an important factor in stock selection to drive outperformance in portfolios," the brokerage said. 

Rishabh Goel, Managing Director at Tailwind Financial Services expects the coming year to unfold in two distinct halves. The first half will be dominated by elections, while the second half will be shaped by monetary policy decisions, including expected rate cuts, he said.

"The current market rally has already factored in potential outcomes and the possibility of up to three rate cuts by the US Fed.