Indian equities are poised to rise further after closing out a record eight-year winning run in 2023, on expectations of continued inflows from retail and foreign investors as well as strong growth in corporate earnings.
That’s the key takeaway from an informal Bloomberg News survey of 10 fund managers and strategists, seven of whom said the NSE Nifty 50 Index will rise in 2024. Of them, two predicted a gain in excess of 10%. Two other respondents forecast a drop. The benchmark has risen 20% this year, setting new records along the way and beating MSCI’s Asia Pacific and emerging markets indexes.
The unprecedented winning streak has pushed India’s market value above $4 trillion for the first time, closing in on Hong Kong. That gap could narrow further as India continues to be one of the most favored markets in Asia, owing to the fastest growth among the world’s major economies and persistent investor concerns over the outlook for its biggest emerging-market rival, China.
“Multiple tailwinds” should benefit Indian stocks, including the nation’s infrastructure push and diversification of supply lines beyond China, said Arun Chulani, emerging market strategist at First Water Ltd. “All this should mean that there will be significant opportunities for wealth creation.”
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Survey respondents pointed to inflows from overseas investors, who have bought over $20 billion worth of local stocks on a net basis so far this year, reversing a record withdrawal in 2022. A victory for Prime Minister Narendra Modi in upcoming general elections, which would help confirm political stability, is seen as crucial for global funds to keep investing in India.
Growing appetite for stocks among domestic retail investors is seen as another positive factor for the market in 2024. Their monthly investments in mutual funds surged 28% from a year ago in November, according to data from the Association of Mutual Funds in India.
Solid corporate results are seen as another catalyst. Earnings for Nifty 50 companies are projected to rise about 15% in 2024, marking a fourth-straight year of double-digit profit growth, according to data compiled by Bloomberg.
Surveyed market pundits mostly prefer shares of infrastructure firms, which have benefited from Modi’s push for industrial development. They also like the information technology sector, which is seen primed for gains on bets for Federal Reserve interest rate cuts and a continued boom in artificial intelligence.
The Lok Sabha polls expected to take place in April-May was mentioned by respondents in the informal poll as one of the key hurdles for India’s equity rally. Valuations were seen as another reason for caution, with the Nifty 50 trading at 20.2 times estimated earnings, compared with a 10-year average of 17.6 times.
“The current run-up in the market has factored in a lot of positives,” said Manish Jain, head of institutional business at Mirae Asset Capital Markets India Pvt. Further gains are likely, however, and “any cool off or dip from here is still a buy.”
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