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Updated January 19th, 2024 at 10:42 IST

Nifty to reach 24,000, anticipating an 11% upside in 2024: Emkay

The small and mid-cap stocks (SMIDs) are likely to outperform, driven by superior earnings growth and momentum in return ratios, the brokerage firm Emkay noted.

Tanmay Tiwary
Indian stock market
Indian stock market | Image:Republic
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Nifty to reach 24,000: Analysts forecast the Nifty to ascend to the 24,000 level, marking an 11 per cent return by December 2024. 

Notably, the markets snapped three-day losing streak on Friday. Nifty 50 was trading 0.92 per cent higher at 21,659.30 while Sensex was up 0.93 per cent to 71,848.01, as of 10:41 am

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“With index setting at long-term mean valuations, we expect 11 per cent return for the Nifty in 2024.The current composition of the Nifty is predominantly defensive. The India story is largely a capex-driven, industrials-led earnings bounce-back. The Nifty, on the other hand, is largely driven by consumption and, to some extent, tech.There is a growing divergence between Nifty and NSE500 weights. So, while the economy and broader markets would still rule at high valuations in December 2024, such optimism may not reflect in the broader Nifty," said Seshadri Sen, Head of Research & Strategist at Emkay Global Financial Services.

The small and mid-cap stocks (SMIDs) are likely to outperform, driven by superior earnings growth and momentum in return ratios, the brokerage firm Emkay noted.

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Emkay anticipates the US Federal Reserve to initiate easing in the third quarter of CY24 with measured cuts, followed promptly by the Reserve Bank of India (RBI). This is expected to boost valuations in growth stocks, particularly in sectors such as manufacturing and select premium consumer categories witnessing macroeconomic tailwinds. 

“Manufacturing and infrastructure are expected to gain prominence as prime themes in the year 2024,” Sen added.

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The brokerage firm also projects that equity inflows for FY25 will surpass the $36.7 billion inflows recorded in FY21. 

The larger market-cap base is seen to enhance India's absorptive capacity, and the country is poised to attract a larger share of risk-off emerging market flows, triggered by Fed rate cuts, especially as China faces challenges in attracting such flows.

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Meanwhile, banks are anticipated to face short-term pressure in the early stages of the easing cycle. 

External-benchmarked mortgages are likely to see a quick downward repricing, followed by short-term corporate loans, the brokerage firm highlighted. 

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Most large-cap banks are expected to exhibit slower earnings growth in FY25 compared to previous years, impacting stock performance. A reverse scenario from 2-3Q FY23 is envisaged, with bank margins decreasing sharply, leading to stocks underperforming.

Regarding the bond market, the rally is anticipated to be limited to the short end of the curve. 

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The 10-year yield, having rallied sharply in CY23, is at one of its lowest points relative to the repo rate, leaving little room for further upside. Short-end yields, however, are projected to decline by 50-75 basis points, contingent on the accommodative stance adopted by the RBI.

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Published January 19th, 2024 at 08:48 IST

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