Jefferies states key reasons why markets could scale new highs. Nifty December’2024 target stands at 24000
Investors and analysts remain watchful on further gains for the indian stock markets during 2024 after stellar returns in 2023 when Markets ended 2023 on a strong note with Nifty rising 20%
Stating reasons why markets could scale new highs, Jefferies India Pvt Ltd in its equity strategy have said that relative valuations are better.
As per Jefferies Nifty is now trading at 20 times 1-year forward earnings estimates. The valuations are higher than the past 10-year average, but relative to emerging markets (ex China) the premium at 67% is only somewhat higher than historical average. Also, on price to earnings growth basis, Indian market appears reasonable. Jefferies December-2024 Nifty target of 24,000 implies 12% total return and assumes current multiple to sustain helped by 12% EPS CAGR (compound annual growth rate) and strong flows.
Also Read- Top 7 investment trends to look out for 2024
Another reason for Jefferies expecting on market scaling new highs is that they expect improvement in foreign inflows during 2024. Key triggers for Foreign Portfolio Investor flow as per Jefferies will be peaking Dollar, May’2024 general elections and rising significance of India in global markets. Referring to Chinese equities that saw foreign inflows of more than $50 billion per year during Calendar Year 2017-2021, while the size of the Chinese market and economy is much bigger Jefferies said that the global environment wasn’t conducive for EM flows
The Indian markets have already been well supported by the domestic institutional flows wherein the rise of ‘SIPs’ (systematic Investment plans) continues to create consistent liquidity pool. Jefferies does not foresee a disruption to the domestic flow particularly as fixed income has become less attractive due to tax changes.
Apart from domestic flows remain supportive and improvement in foreign flows heling gains for Indian stock markets, another reason for market scaling new highs is that India’s multi-year capex cycle has started unfolding. All the three elements of the capex cycle (Housing, Corporate Capex & Govt Capex) are now firing and hence the potential global slowdown should have limited impact on India, said Jefferies Also expected potential Government capex slowdown won’t hurt the broader capex cycle.
Strong tax collections and subdued social spending allowed the Government to raise Capex 3 times over past 5 years. Expected fiscal consolidation by 140bps over the next 2 years implies governments Capex could slow down, but private capex (75% of GFCF or Gross fixed capital formation) pick-up should more than offset, said Jefferies.
They remain positive on domestic economy, capex and the key picks of Jefferies include large banks (as Axis Bank , ICICI Bank ), developers (Lodha , Godrej Properties), Power stocks ( Coal India , JSW Energy ), two-wheeler ( TVS Motor, Eicher Motors ), Telecom ( Bharti Airtel ) and capital goods ( Adani Ports, Kajaria Ceramics ).
Also Read- FPI flows into India may remain supportive for markets during 2024 feel experts
Banks as per Jefferies is the best risk reward sector. The Banking sector has benefitted from the sector rotation (into large caps) seen in December’2023. But even beyond that near-term trade, the sector stands out as the only sector with below average multiples and possible earnings surprise if asset quality holds up, said Jefferies. Also, more foreign flows from global mandates suit the large banks and financial theme well.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
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Published: 02 Jan 2024, 10:35 AM IST
