But risks persist. Uncertainty on the geopolitical front and crude oil prices remain a concern, while on the domestic front, General Elections, inflation and interest rate trajectory are the key risks.
“Any possible mandate from the forthcoming General Election, which leads to political instability or any possible spike in global oil prices (due to strong recovery in global economic growth) significantly beyond $120 a barrel will lead to Sensex falling below 55,000. These are two key risk factors for the domestic market in the next one year,” said G. Chokkalingam, Founder and Head of Research at Equinomics Research.
However, Chokkalingam believes the domestic equity market could rise 15 per cent and the Sensex could rise to 75,000 by the next Diwali.
“Maintaining above 6 per cent GDP growth would be a major trigger for this gain. Over 6 per cent growth would be the fastest among major economies in the world and therefore, we can expect significant net inflow from foreign portfolio investors (FPIs),” Chokkalingam said.
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Bright outlook for Nifty 50
After the broadly in-line Q2 results, the concerns over market valuations have also eased. Some experts believe with healthy economic growth, the earnings of India Inc. will also rise which will sustain the high valuations of the domestic stock market. Considering this, experts see healthy double-digit growth of the Indian market by Diwali 2024.
“Though Indian markets look expensive vis-à-vis other emerging markets, we do not find the current valuation expensive as India offers a sustainable and structural story which has the potential to reach a GDP of $5 trillion soon. We expect markets to deliver a return of around 15 per cent by next Diwali on the back of robust corporate earnings, strong domestic flows and reformist government measures,” said Manish Chowdhury, Head of Research at StoxBox.
Brokerage firm Motilal Oswal Financial Services believes despite global uncertainties, India remains a shining star and is expected to maintain its outperformance.
“Nifty is trading at a 12-month forward P/E (price-to-earnings ratio) of 17.6 times, which is at a 13 per cent discount to its 10-year average, thus providing comfort. We believe that over the next couple of quarters, sector rotation could be an important driver along with the overall market uptrend,” said brokerage firm Motilal Oswal.
Also Read: Diwali 2023: Can Nifty 50 hit 25,000, Sensex touch 75,000 in Samvat 2080? Here’s what experts say
According to Motilal Oswal, (1) state-level elections in Nov-Dec’23, followed by the General Election in May 2024, (2) global factors such as economic growth, interest rates, bond yields, inflation, geopolitical issues, etc., and (3) Nifty earnings, which are expected to maintain their healthy growth at 18 per cent CAGR over FY23-25 are the key themes for the market for Samvat 2080.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services believes the market may witness a major rally before the next Samvat.
Once there is some clarity on the outcome of the next general elections due before May 2024, markets will rally,” said Vijayakumar.
“The resilient Indian economy and good corporate earnings will attract big investments into the market. If the US bond yields continue to decline, FPIs will also become buyers in the market. The bull case scenario is a flood of institutional money – both domestic and foreign – and a stable government triggering a big rally in the market taking the Nifty beyond 23,000 by the next Samvat,” Vijayakumar said.
Which sectors should you bet on?
Deepak Jasani, Head of Retail Research at HDFC Securities favours domestic-oriented businesses and sees opportunities in the sectors like materials, pharma, oil & gas, small finance banks, petrochemicals, consumption, power EPC and restructuring plays for the next year.
Vijayakumar of Geojit Financial Services believes large caps across sectors will lead the rally.
“The likely outperformers are financials, capital goods and automobiles. In IT, midcaps will continue outperforming large caps,” said Vijayakumar.
Chowdhury of StoxBox said his top sectoral picks for the next one year are automobiles, cement and IT.
“We believe that strong order book, premiumisation trend and expected recovery in rural demand would provide tailwinds to the larger auto space including passenger vehicles and two-wheelers,” said Chowdhury.
“The improved pricing in the cement industry and the expected uptick in volumes on the back of the government’s thrust on infrastructure in the election year would keep cement companies buoyed in the next one year, said Chowdhury.
“A contrarian sectoral bet would be the IT sector as we believe that most of the negative is already priced in and improved operational performance and strong order pipeline bodes well for the IT sector recovery going ahead,” Chowdhury said.
Also Read: Diwali 2023: Where do experts see gold prices in Samvat 2080?
Also Read: Samvat 2080: Chola Securities lists top 9 stocks for Diwali; RIL among fundamental picks, DLF among technicals
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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Updated: 08 Nov 2023, 02:13 PM IST