The year 2023 presented a captivating journey for both the Indian and global equity markets. Initially marked by cautious expectations and noteworthy volatility, the Indian market showcased a remarkable turnaround in the latter half, rebounding from its low point in March 2023. As we step into 2024, the Indian economy stands out amidst the challenges faced by other emerging economies.
Most experts believe that India is likely to sustain its growth trajectory in the upcoming year, solidifying its position as a bastion of stability amid the undulating waves of the global economy. Key drivers of this optimistic outlook include the reinforced balance sheet strength of corporate India and the significantly improved health of the Indian banking system. These positive factors are poised to act as catalysts, propelling Indian equities to achieve double-digit returns over the next two to three years. This optimistic forecast is underpinned by the expectation of robust double-digit earnings growth, further contributing to the overall resilience and attractiveness of the Indian market.
As investors prepare for the year ahead, there are several key considerations to keep in mind to navigate the evolving economic landscape and financial market including global geopolitical risks, inflation dynamics, interest rate environment, market volatility, currency movements, government policies, and general elections.
Keeping these considerations in mind, experts tell us some key things, according to them, that investors must keep in mind for the year ahead.
Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities
One main thing – Volatility
India VIX traded at record lows in 2023. It traded in a range of 17.35 to 8.18. Both the yearly high and low points are the lowest ever, on record compared to the highs and lows of the previous years. This is going to change in 2024. The oldest and largest democracies of the world – the US and India are about to go for general elections in 2024. The US is the world’s most powerful economy and India is one of the fastest-growing large economies. When 170 crore people in these two countries exercise their voting rights it’s bound to have an impact on the markets too. Low VIX environment will become a thing of the past. Tighten your seat belts and get ready for a roller coaster ride in 2024.
Anshul Arzare, MD and CEO, Yes Securities
Some factors that could pose a risk, include geo-political risks, global slowdowns, quantitative tightening, and high valuations.
The RBI has also identified a surge in unsecured loans as a potential risk and has announced policy measures to mitigate the concern. It is essential to closely monitor the credit expansion within the system, given the substantial surge observed this year. A potential default could pose a significant risk to one’s portfolio.
Additionally, it is important to monitor both global and domestic inflation forecasts. Keeping an eye on the Fed’s position on inflation and policy rates is equally vital, as it has a direct impact on emerging markets such as India.
The approaching elections and Union Budget will also significantly affect the markets, likely causing volatility. It’s crucial to avoid being swayed by short-term gains or losses during this period.
Jyoti Roy, Head of Equity Research at Sanctum Wealth
While we remain positive on the longer-term growth prospects for India, we believe that markets will track earnings growth from here on. We expect domestic liquidity will continue to remain strong and will help support markets even if FII flows slow down due to any unexpected global event.
We also expect that the rally will be broad-based in the first half of the year post which markets will keep getting narrower and stock picking will be the key to generating alpha.
We expect infrastructure, capital goods, real estate and PSU themes will continue to play in 2024 though investors will need to be selective in their picks given the recent run-up in these sectors. We also expect financial services to do well going forward given recent underperformance as pressure on net interest margins should peak out in the Q3FY24 post which NIMs should stabilise.
Moreover, while risk-reward appears to be favorable over the next year there are a few risks that investors need to be cognizant of. Markets have started building in a soft landing for the US economy, and a sharper-than-expected slowdown can lead to increased volatility in markets.
Furthermore, while it is generally expected that the incumbent government will come back to power in the 2024 general elections, the margin of victory will be critical and a narrower-than-expected margin may be taken negatively by the markets. There is a high probability that returns may get front-loaded in the run-up to the general elections given expectations of the incumbent government returning to power with a strong majority.
Kavitha Subramanian, Co-founder of Upstox, tells us what to do to keep investments safe:
Stick to your financial plan and move towards achieving your investment goals: Do not look too much into the short-term gains and past performance. Just stick to your long-term plan and remain focused on your investment goals. Remain disciplined and do not leverage even if the market is expected to deliver a double-digit return. Investors should see to it that they do not get emotionally affected by short-term market fluctuations.
Focus on risk-adjusted returns: It is unwise to only focus on returns while making investment decisions. The delicate relation between risk and returns needs to be understood while making investment decisions. Also, realise that every investment will offer a unique risk-return combination and that every opportunity needs to be evaluated on its merits. Every individual investor must have a good understanding of risk-adjusted returns while participating in the equity markets.
Financial literacy: There is no right time to start investing. What is important is to know how to invest right. Financial literacy is key in helping Indian investors in ‘investing right’. We believe investor education is key to participating confidently in the equity markets.
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 decision.
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