Updated December 30th, 2023 at 12:48 IST
Foreign flows, private capex to drive markets in 2024: Quantum Asset Management
With decadal low FPI ownership in Indian equities, the moderation of global inflation and interest rates could attract substantial foreign flows.
The year 2023 has defied the consensus expectations of moderate equity returns. Despite the backdrop of escalating global interest rates, limited potential for valuation expansion, and heightened crude prices amid geopolitical tensions, the Sensex has delivered an impressive total return of 19.1 per cent.
The gain has been primarily fuelled by robust earnings growth, with the BSE Midcap and BSE Smallcap indices outshining with returns of over 45 per cent.
The standout performance in large and mid-cap indices can be attributed to earnings growth, accompanied by relatively stable earnings multiples. This indicates a strengthening of the earnings upcycle initiated in FY22, highlighting the resilience of the market amid challenging circumstances, analysts said.
Key triggers for market direction in 2024:
Demand pickup in mass segment
The mass market and rural segments saw subdued demand post-pandemic due to inflationary pressures. A moderation in inflation could pave the way for a recovery in the mass market, contributing to the ongoing economic upcycle.
Volume growth driven by broad-based demand is anticipated to support earnings growth in 2024, with indications of green shoots in rural consumption, notably in two-wheeler sales, Quantum Asset Management Company said in a note.
Private capex revival
While recent capital expenditure (capex) has been primarily government-driven, indications from the Reserve Bank of India (RBI) survey suggest that manufacturing sector capacity utilisation is at a healthy level of 74-75 per cent.
A buoyant demand environment, coupled with increased utilisation, may bolster the trajectory of private capex, which is already showing early signs of revival.
Despite robust Domestic Institutional Investor (DII) flows, rising global interest rates have restrained Foreign Portfolio Investment (FPI) flows.
With decadal low FPI ownership in Indian equities, the moderation of global inflation and interest rates could attract substantial foreign flows, given India's stable policy environment and resilient economy, Quantum Asset Management Company added.
Published December 30th, 2023 at 12:43 IST