Market Outlook: 2024 time to be cautious, not fearful, says Sharekhan; DLF, HDFC Bank, Hero Moto among 12 top picks

Sharekhan, a brokerage house, has predicted encouraging market growth in 2024, as economic conditions show improvement against a global slowdown. However, some areas have reportedly become overvalued, such as the micro cap segment and primary issues, which include the SME section. The Nifty indicator, at 23.4 times the trailing 12 month price earning (PE), suggests moderate pricing in light of the expected 12-14% CAGR earnings growth for the succeeding two years.

In 2023, the Indian market yielded superb returns and rose by 19%, weathering hurdles such as a few US regional banks going bankrupt, geopolitical risks rising and high global interest rates. Despite these hurdles, the market managed to recover swiftly, largely due to robust domestic inflows and positive economic data. The successful state elections results for the BJP, as well as an upgraded GDP forecast to 7% for FY2024, have boosted sentiments.

Sharekhan included improving largecap exposure in its portfolio rebalancing while advocating for partial profit taking in the broader market. They also recommend increasing ‘Value Stocks’ investment and reducing ‘Growth stocks', which are currently trading at high valuations.

The brokerage house also predicted promising growth for pharmaceutical, two-wheeler auto and IT sectors. It maintained its multiyear investment focuses in sectors such as capex (infrastructure and real estate), capital (financial services) and consumer expenditure, leading to more investment suggestions and potential performing stocks for 2024.

Sharekhan emphasises the positive impact of revival in property cycle on several sectors, including generating employment across the income levels. Noting about the improvements in budgetary allocation for various industries and the innovative asset management strategies by the government.

Sharekhan predicts a continuation of the DII flows, giving resilience to the Indian market against FII flows, considering the recent commentary from US Federal Reserve encouraging emerging markets, including India for 2024. Relying on this, foreign inflows into debt around $25 billion is anticipated. This will contribute to a stable Rupee and low funding cost for India, leading to strong corporate earnings.

The Nifty has seen a substantial 20 percent increase in FY24 YTD due to sustained DII flows and recovering FII flow on a healthy growth outlook, according to Sharekhan. In the light of these positive economic changes and indicators, such as rising GST collections, improved credit growth and performance in manufacturing and services, Sharekhan recommends investing in a promising 2024.