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In a market outlook, Bajaj Finserv Mutual Fund said that equity markets will continue to remain bullish. It said that while the equity market has given positive results consecutively for the past 8 calendar years, there is a lot of steam left in the market.
The report says that India is considered a desirable place for investment due to its political, macro and earnings stability and healthy balance sheet in both the equity and debt markets.
The report also highlights positive trends in private consumption and private corporate capex, making the country an attractive prospect for investors.
Here are some key highlights of market outlook 2024:
- The real GDP growth rate for India is highest amongst large economies and is expected to remain this way in the medium term driven by favourable demographics and increased labour force participation from women
- The public finances, in terms of forex reserves and external debt are at comfortable levels providing cushion to external shocks
- Corporate India is expanding capacities and investing in newer factories, robotics and automation and technology
- Premiumization trends in cars and real estate and other discretionary items are visible and is expected to get stronger
- Domestic flows are strong with MF AUM at an all-time high. Strong SIP flows provide sticky monthly liquidity to the markets. Capital market investments are still a small portion of Indian household savings providing long runway for growth
- High speed indicators like e-way bills, port activity & government spending on capex is tracking well
Key risk to watch out for:
- Impact on slowing global economy to have impact on trade, flows and prices
- An adverse election outcome can bring in political instability (a low probability event)
- Erratic weather can further delay revival in rural economy. It can also result in the government diverting funds to support rural economy from capital expenditure budget
Sectoral outlook
Banking is witnessing improved growth rates as credit demand is picking up. The sector is seeing all time low non-performing loan accretion & high capitalization levels.
Consumer staples are facing demand headwinds with weak rural demand. Discretionary consumption is better placed with premium segments doing much better in comparison to the affordable segments. There are pockets of undervaluation in the sector when looked at in context of improving outlook.
IT Services demand environment remains weak with the expected slowdown in developed world weighing on IT spends of global companies. Cost pressures have been reduced as supply concerns have eased off.
Capital goods and industrials cyclical upturn in demand is expected to continue in the medium term. General elections, however, can act as a pause as government orders might slow down.
Indian pharma market is witnessing an improved demand on a weak base. Margins are expected to be supported by falling input prices. Overall, pharma remains a bottom-up sector with the probability of event risks (USFDA inspections) remaining significant. Overall, pharma remains a bottom-up sector with the probability of event risks remaining significant.
In addition, interest rates in the fixed income market have peaked out and are expected to start decreasing. India is in a favorable position regarding its fundamentals and investment inflows.
Further, due to India’s inclusion in the US bond market, more flows are expected and as per the current scenario, it’s a good time for investors to invest in bonds.
There is a chance for attractive returns through high coupon rates and possible capital gains by maintaining a low level of credit risk.
