Outlook 2024: Nifty 50 eyes 25,000 by Dec 2024; Here’s what fuels the rally
Domestic equity benchmarks Nifty 50 and BSE Sensex rose around 20 per cent in 2023, their second-best year since 2017, and were among the top-performing stock indexes globally. The broader small- and mid-caps gained about 55.62 per cent and 46.57 per cent in 2023, far outperforming the blue-chip indexes despite valuation concerns.
On the last trading session of 2023, the Nifty 50 settled at 21,731.40 and Sensex closed at 72,240.26, snapping their five-day winning streak, on profit-booking in select heavyweights even as the mid and smallcap indices ended with healthy gains. The BSE Midcap and Smallcap indices hit their fresh record highs of 36,889.87 and 42,728.21 respectively during the session.
Also Read: New Year Stock Picks: Religare Broking lists Asian Paints, Eicher Motors among 5 top picks for 2024
Going forward, markets are eyeing a potential upside of 15 per cent from the current levels as Nifty 50 is likely to claim the 25,000-mark by the end of 2024 and the Sensex target is set at 83,250, according to domestic brokerage firm ICICIdirect. Several greenshoot factors such as sustained domestic mutual fund inflows, return of foreign buying, better-than-expected economic growth, and healthy corporate earnings will contribute to the market’s rally in 2024.
Nifty 50 fair value pegged at 25,000: ICICIdirect
Corporate earnings recovery has been healthy in the recent past with Nifty earnings growing at 22 per cent compound annual growth rate (CAGR) over FY20-23. ‘’Going forward, introducing FY26E, we expect Nifty earnings to grow at a CAGR of 16.3 per cent over FY23-26E,” said the brokerage.
‘’Our December 2024 target for Nifty is set at 25,000 wherein we have valued Nifty at 20x PE on FY26E EPS of ₹1,250/share with corresponding Sensex target set as 83,250; offering a potential upside of ~15 per cent from current index levels,” said Pankaj Pandey, Head Research, ICICIdirect.
Nifty earnings has grown more than 30 per cent in H1FY24 on absolute basis. In 2023, the domestic economy was resilient all across this time frame with revival in private capex cycle, robust infrastructure spending by government, record goods and services tax collection (GST) and most importantly margin expansion led healthy high double digit corporate earnings growth, said analysts.
‘’As we embark on CY24, there are greenshoots in the form of continued corporate earnings momentum domestically, healthy gross domestic product (GDP) growth, benign commodity prices outlook as well as likely rate cut globally. There seem to be more positive than negatives ahead. Amidst this setup, India is in a sweet spot vis-à-vis global peers with macroeconomic stability and corporate earnings in sight,” said the brokerage.
Here’s what keeps ICICIdirect bullish on Indian markets —
1.Resumption of FPI flows to propel markets further: Indian Indices made fresh life highs and retained its the best performing market helped by the resumption of foreign inflows. India’s share in emerging market (EM) index has almost doubled from seven per cent to 14 per cent in last eight years and is likely to increase further with higher economic size.
Also Read: Nifty, Sensex see gains of up to 20% in 2023, ending with gains for 8th straight year.
The net flows for the current calendar year is nearly of $17 billion while rest of the emerging markets have seen nominal flows. In the post COVID era, while most of the markets are still reeling below their 2021 highs, Indian indices have given significantly higher returns than the rest, according to the brokerage.
2.Government Bond Index inclusion gave a structural boost: JP Morgan’s Bond index inclusion could alone lead to foreign inflows of $25 billion or ₹2 lakh crore in Indian debt market, according to ICICIdirect. The share of foreign portfolio investors (FPIs) in government borrowing may rise to 10 per cent-15 per cent in FY25, highest since FY19.
Apart from JP Morgan’s GBI-EM-GD index, Bloomberg Global Aggregate Index is also likely to include Indian bonds in its index. It has an estimated AUM of $ 2.5 trillion and with 0.6-0.8 per cent weight, additional potential inflows could $15-20 billion. Such inflows coinciding with global rate-cut cycle is likely to push bond yields lower resulting into lower cost of funds for Indian corporates.
3.Consistent MF SIP inflows, set to rise in 2024: The Indian mutual fund (MF) industry has been witnessing a remarkable surge in interest among investors with the Assets Under Management (AUM) growing by nearly 21 per cent to touch ₹49.05 lakh crore as on November 30, 2023, compared to the year-ago period.
The industry is almost halfway through its targeted aim of achieving an AUM of ₹100 lakh crore over the next few years. Nearly one-fifth (19 per cent) of the industry’s total AUM is backed by inflows through the SIP (Systematic Investment Plan) route.
SIP contribution increased by nearly 25 per cent at around ₹1.56 lakh crore in 2022-23, as against ₹1.25 lakh crore in 2021-22. During April-November 2023, SIP contributions stood at ₹1,24,313 crore, almost 24 per cent higher, compared to ₹1,00,581 crore recorded during April-November 2022 period.
4.Strong macroeconomic indicators; high GDP growth: India’s economic growth is expected to average 7-8 per cent over the next 10 years, making it one of the world’s fastest growing economies. By 2030, India’s GDP is expected to reach $7 trillion, a level only achieved by the US and China.
The Finance Ministry said said in its half-yearly economic review report today that India’s economy is expected to comfortably surpass the government’s growth estimate of 6.5 per cent in FY24. The momentum gained in the second quarter of FY24 is likely to be sustained in the October-December quarter, according to the government.
5.Robust corporate earnings: Market experts estimate that the earnings growth would be around 15 per cent for markets in 2024. India’s earnings remain resilient post a decade long down-cycle from 2011-2020 as investors added a significant ₹81.90 lakh crore to their wealth in 2023 powered by a stellar rally in stocks.
According to Bloomberg consensus estimates, Nifty 50 index EPS is expected to grow by 14 per cent and 16 per cent in FY2024 and FY2025. Overall, the EPS growth of ~18 between FY2020-2025, makes the current cycle the best since the 2004-08 period, according to Bloomberg.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 29 Dec 2023, 09:13 PM IST
