The bull run in the equity markets is expected to continue in 2024 as well. Emkay Global Financial Services anticipates the Nifty50 to end the year at 24,000 points, with an 11 per cent return and small and mid-caps to outperform.

In a presentation, the broker said that the key themes expected to play out in the current year are rate cuts, the budget, more reforms, and a probable revival in mass segment spending. It also expects earnings growth to continue in the mid-teens with improved returns on equity.

The stock markets are expected to show the most returns in the first half of fiscal FY25, Sheshadri Sen, Head of Research & Strategist, said, with the March and December quarters likely to be muted.

Globally, as well as in India, rate cuts will be a dominating factor. The US Federal Reserve is expected to start cutting rates towards the later half of the year and the Reserve Bank of India is also expected to follow suit. However, the pace and depth of the cuts are still uncertain.

Emkay expects the Fed to cut rates in the third quarter of calendar 2024. This would result in a re-rating in the market that would have more impact on the small and mid-caps than the benchmark.

The broker is overweight on sectors such as consumer discretionary, materials, and industrials, while it is underweight on financial, IT, and staples. Sen said that he expected the outlook for the software sector to improve towards the middle of the year.

The elections will likely provide a stimulus to mass consumption, and this could provide a recovery in the sector.

Foreign portfolio inflows were a key element in 2023 and rate cuts expected later this year, are seen to have an even bigger impact. According to Emkay, India’s inclusion in the JP Morgan bond index is expected to attract debt market inflows of $25-30 billion this year, and rate cuts would spur inflows into equities. It expects inflows in FY25 to exceed the flow seen in FY21 ($36.7 billion).

Due to a large market-cap base, Indian markets have the capacity to absorb the inflows, and more inflows are likely come to India as China is unable to attract flows.

Private capital expenditure has stubbornly remained at low levels throughout last year and the bulk of the spending has come from the government. This could change this year though it would still be playing a supporting role. According to Emkay, rate cuts are unlikely to have any significant effect on the growth of the Indian economy, as the quantum of reductions would be too low. There is no slump as such to recover from, and fiscal prudence measures are likely to offset any advantages from the rate cuts.

In the consumer discretionary and automobiles sector the broker’s top picks are Hero MotoCorp, Tata Motors, Zomato, UltraTech Cement, and Ambuja

In the small and mid-cap space, its favourites include JK Tyre, Aditya Vision, and Saregama. Its top sells are Chola Finance, Jubilant FoodWorks, LTIMindtree, Britannia, and Colgate.