We hold a positive view on the domestic market with 10-12% returns in CY24: Geojit ED

In line with our internal study, SEBI also came out with a report on F&O trading, which reveals that 90 per cent of the traders incurred losses while dealing in F&O. But surprisingly the number of traders has gone up eight times in he last three years, which means more and more new traders are losing money.

These individuals with limited knowledge may have been influenced by online influencers. As a responsible intermediary, we believe it is important to caution investors that F&O is not for everyone. We want to inculcate investors the importance of long-term investments in addition to following a systematic route of investing.

Unmistakably, technology has improved vastly in the last few years, be it in terms of internet speed, apps, devices, or even in terms of ease of payment. The millennials and GenZ, who have been quicker to embrace these advancements, make up a sizeable portion of new traders. That said, the instruments that investors choose are often a reflection of the times that we live in.

We are sure that a good part of these new age F&O traders who have been introduced to the stock market ecosystem will surely see the virtue of patience associated with long term stock market investment as they mature.

We hold a positive view on the domestic market, anticipating a 10–12 per cent return from the primary index in CY24. The modest returns are expected due to high valuation in the broad market and slowing global economy. Short-term worries are because of the extended rally in Nov-Dec 2023 driven by a reversal in global bond yields, and apprehensions about the El-Nino effect on food inflation in H1CY24.

However, we are confident about the resilience of the domestic economy, which is projected to grow at a steady rate of 6 to 7 per cent and may be more over the next decade. High capex forecast from the government, industry, and housing sectors, will boost long-term earnings growth.

Further, a positive shift is anticipated in global monetary policy to “accommodative”, attracting higher FII inflows into India, which remained subdued in the secondary market during CY23.

Yes, elevated valuations of mid- and small-caps are anticipated to impact their medium-term performance. High inflows from retail investors in CY23 have led the rally and the trend is expected to continue in the short-term.

In CY24, safety is in large-caps, as their subdued performance and fair valuation is in contrast to noteworthy earnings growth achieved in CY23 and anticipated for CY24. This positions large-caps as an appealing investment opportunity. Moreover, they are better placed to handle the global economic slowdown forecast in CY24.

Specifically, we express a positive outlook for large-cap entities in private banks, industrials, pharma, chemicals, and IT.

Post the meteoric rise of 2020, and the follow through momentum that persisted for some more time, the volatility in stocks have generally eased. In December 2023, VIX, a measure of volatility, was closer to record low. Further, Indian equity investors have become more mature, demat accounts have risen over the last three years, and number of SIPs have increased ensuring not only a steady flow of money into the equity market, but also less dramatic price drops.

In other words, save a few stocks that run up quickly or show volatility, equities have generally become stable. With this in the backdrop, the shorter duration options like index weekly options presented the perfect foil for some investors, as the indices generally respond more to high frequency macros, and global events, thereby presenting more trading opportunities in the options.

Primarily, the projected high corporate earnings growth at a CAGR of 14 per cent for FY25 and FY26 is poised to underpin a premium valuation. The current one-year forward P/E is 20x, which is only 7.5 per cent above the long-term average. Given the projected strong long-term earnings growth, it has potential for further upside valuation.

Secondly, FIIs are expected to increase their inflows into EMs in CY24 due to a reversal in bond yields. This trend is expected to particularly benefit India, the fastest-growing economy.

Thirdly, it is an election year with a progressive outlook in anticipation of the continuation of pro-industry and high fiscal spending, which is good for consumption spending and private revenue generation.