Nifty 50 valuations are rich, offer 8-10% upside in 2024, says HDFC Securities; lists out stocks to accumulate next year
The valuations of Indian stock market indices are rich and leave a little room for any large upside next year, according to brokerage firm HDFC Securities which expects Nifty 50 to see another 8-10% upside from the current levels.
The Nifty 50 index is now trading at ~23x FY24 and ~20x FY25 consensus EPS, indicating limited upside potential in the next 12 months, said the brokerage house. It believes growth hereon will be volume led while the margin expansion story is largely over.
Deepak Jasani, Head of Retail Research at HDFC Securities expects Nifty 50 to rise 8-10% from the current levels by the end of 2024.
Also Read: Outlook 2024: How equities, gold and crude oil will perform next year
“Indian economic growth will continue to be led by investments rather than consumption in 2024 indicating growth in industrial, manufacturing, real estate and allied segments. Projected earnings growth for HSIE coverage universe (~215 stocks): 29% and 8% for FY24 & FY25 respectively (Ex-energy 19% and 15% for FY24 & FY25, respectively, as FY23 was an exceptional low base year for energy),” the brokerage firm said in a report.
Earnings growth will be led by BFSI, industrials, autos, cement and pharma sectors. Margin benefits for commodity consuming sectors due to deflation in commodity prices are largely done, so any growth hereon must be volume led, it said.
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Large cap index to offer better risk adjusted returns vis-à-vis mid or small cap indices led by higher earnings growth and relatively better valuations.
Meanwhile, Dhiraj Relli, MD & CEO of HDFC Securities said that the outcome of the general election will have a ‘limited impact’ on the market as investors have already started pricing in the incumbent BJP retaining power after the impressive win in the state polls, and political stability because of that.
Relli urged everybody to look at the market story beyond the election results as well and pointed to the softening of inflation and rate cuts by RBI in the second half of the year.
Inflation will cool down to as low as 2.5% in the second half of the new year which will lead to a shift of stance by the central bank and also cuts of 0.50% in rates, the brokerage said.
It feels the small and mid-caps have seen huge appreciation in the recent past and will offer limited upside, and made its preference clear for the large caps, Relli said.
HDFC Securities preferred sectors are large-cap banks, industrial and real estate, power, autos, pharma, OMCs, gas, and capital markets. It remains underweight on consumer (staples and discretionary), metals, chemicals and small banks/NBFCs.
The brokerage listed stocks to accumulate over 2024. These stocks are Infosys, Axis Bank, GAIL India, Adani Ports & SEZ, JSW Steel, Grasim Industries, Bajaj Finserv, Info Edge (India) and Pidilite Industries.
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: 20 Dec 2023, 02:55 PM IST
