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2023 ended on a good note for the equity markets with key indices crossing new milestones. However, considering the upcoming election and dynamic geopolitical situation, the key question is what will happen in 2024.
Keeping these in mind and to help you create a suitable equity strategy, MF professionals share their preferred fund categories and sectors.
‘IT and banks: Muted earnings expectation and reasonable valuation’ - Christy Mathai and George Thomas, Equity fund managers, Quantum MF
IT and banks: Muted earnings expectation and reasonable valuation.
Two promising sectors, which have delivered relatively muted returns along with a potential improvement in earnings trajectory are banks and IT. A favourable credit cycle coupled with a revival in corporate credit offtake can drive the earnings of banks. A likely soft landing in the US can trigger a faster conversion of deal wins to revenue in the IT sector. Apart from fundamental reasons, these two sectors could be major beneficiaries of a reversal in FPI (Foreign Portfolio Investment) flows.
‘Sectoral funds may present opportunities’ - G Pradeepkumar, CEO, Union MF
We recommend a cautious approach in the mid-cap and small-cap space, which have performed well in recent months. Talking about the large cap, the stocks appear reasonably valued at this stage. Also, sectoral funds may present opportunities for those wanting to take tactical calls. However, it requires careful consideration and advice from qualified advisors or distributors.
Also, it is advisable for retail investors to make staggered investments through SIPs or Systematic Transfer Plans (STPs).
‘Opportunity for active funds to outperform the benchmark remain bright’ - Rahul Singh, CIO-Equities, Tata MF
Whatever be the upside and the timing of it in 2024 i.e. either steady returns through the year or a sharp spike in the short term, it is clear that the economy is going through a broad-based recovery with structural drivers. Hence the opportunity for active funds to outperform the benchmark remains bright.
‘We expect the IT services sector to emerge as a dark horse’ - Trideep Bhattacharya, CIO - Equities, Edelweiss MF
In terms of investment themes, we believe that it makes sense to be invested in companies which have demonstrated resilience in earnings. These companies belong to sectors such as industrials, power-related industries, non-banking financial companies (NBFCs), and real estate. In 2024, we expect the IT services sector to emerge as a dark horse. The IT services sector is a strategic theme as global growth is expected to bottom out during the year
Overall Outlook
‘India has the right ingredients in place to set the momentum further over the medium to long term’ - Ashish Gupta, CIO and Shreyash Devalkar, Head Equity of Axis MF
Heading into 2024, all eyes remain focused on global growth, inflation and on monetary policy outcomes in major economies.
Also, 2024 is an election heavy year and will be held in countries including Taiwan (January), Indonesia (February), Russia (March), India (April-May), the United Kingdom (likely April or May), Korea (April), Mexico (June), the European Parliament (June), Venezuela (sometime in the second half), and the United States (November). The outcome of these elections will influence the trajectory of economic performance in these countries and could provide a backdrop to the global geopolitical landscape.
Growth in the first half is likely to be driven by election-related spending which should boost consumption demand. Post-elections, we expect investment growth to take centerstage, particularly from the private sector.
Overall, India has the right ingredients in place to accelerate momentum further over the medium to long term. The big picture is suggestive of an economy that will benefit from long term factors like improving infrastructure, manufacturing and the China plus one strategy.
India continues to be one of the few geographies globally that continues to record strong GDP growth with multiple positive drivers. This factor should continue attracting investors to invest in India.
