Global financial advisory firm BNP Paribas expects Nifty to post a high single-digit return in 2024 while domestic brokerage Emkay Global Financial anticipates an 11 per cent return. “While most factors remain favourable for Indian equities in 2024, valuation comfort has reduced, and we see limited upside,” said BNP Paribas, which expects Nifty to hit 23,500 by December 2024.

FPIs flow to continue

Strong domestic and FPI flows into Indian equities boosted domestic stocks in 2023, it said, adding “We see no reason for this to change.” The macro environment seems favourable with inflation easing. “Based on State election results, we think market concerns about the upcoming elections have eased. Also, in terms of underlying fundamentals, India has seen double-digit earnings growth with minimal consensus downgrades in recent quarters, BNP Paribas said. It added that it preferred large-caps.

Emkay Global Financial, on the other hand, said Nifty was to scale up to 24,000 level, registering a return of 11 per cent by December 2024. SMIDs (small and mid-caps) should continue to outperform, with better earnings growth and momentum in return ratios.

Seshadri Sen, Head of Research & Strategist, Emkay Global Financial Services, said the India story is largely a capex-driven, industrials-led earnings bounce-back. The Nifty, on the other hand, is largely driven by consumption and, to some extent, by tech. “There is a growing divergence between Nifty and NSE500 weights. So, while the economy and broader markets would still rule at high valuations in December 24, such optimism may not reflect in the broader Nifty. Manufacturing and infrastructure are expected to gain prominence as prime themes in the year 2024,” Sen said.

IT services to recover

However, BNP Paribas said its extensive valuation benchmarking exercise, spanning indices and sectors, indicates that its preferred ‘growth at a reasonable valuation’ opportunities are increasingly limited. “We continue to prefer affluent consumption over mass. We prefer private banks, given their strong fundamentals and reasonable valuations.

“We expect IT services growth to recover and telcos to raise tariffs. We would avoid staples and pharma for growth challenges. We expect autos to consolidate after a strong 2023. We expect high single-digit returns from Nifty 50 in 2024 and prefer large caps,” BNP Paribas said.

Emkay Global also opined that a BJP win in the April-May national elections is almost a done deal and its focus is on the FY25 Budget, with manufacturing and infrastructure as the key themes. “We also see the possibility of a recovery in mass spending. This is not certain, but we think it is worth taking some exposure to play this.”

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