India's macro and micro fundamentals have been strong in the year 2023, and brokerage Motilal Oswal expects the outperformance to continue even in 2024. The current year is ending with some astonishing milestones as the Nifty scales above the 21500 mark while the Sensex crosses 71000. In 2024, the brokerage believes several key events next year would influence market. And in such situations, the brokerage has recommended 10 stocks for buying including Tata Consumer, L&T and L&T Technology Services coupled with Zomato, Coal India, SBI, and Oil India among others.
Here's what Motilal Oswal Broking and Distribution highlights for robust macro and micro fundamentals of 2023 for India:
GDP growth in 1HFY24 stood at 7.7% led by a robust print in manufacturing and investment sectors. This led to RBI revising its GDP forecast upwards to 7% for FY24. The RBI has given robust growth projections for FY25 as well with growth averaging 6.5% in the first three quarters of the fiscal. Such optimistic expectations for real GDP growth give space to remain bullish on the market. Even other high-frequency data points (GST collections, auto monthly numbers, power demand, PMI data) witnessed robust growth. On the other hand, the 1HFY24 corporate earnings ended on a buoyant note with Nifty companies delivering 30% YoY PAT growth.
Motilal expects the Nifty EPS CAGR to be around ~20% over FY23-25, with scope for further rerating.
Furthermore, with the BJP's sweeping victory in the State elections of Rajasthan, Madhya Pradesh and Chhattisgarh, the confidence of the investors regarding political continuity post-2024 Lok Sabha elections has received a big boost. Already the sentiments were buoyed by the healthy trend in corporate earnings growth and resilient domestic macros and is now likely to strengthen further.
"This augurs well for macro and policy momentum for India, which, at the moment, is seeing the highest growth among major economies (both GDP as well as corporate earnings)," Motilal's note said.
Also, it added, "all this has led to upgrade in India's rating as well as GDP growth forecast by various global firms, resulting in BSE-listed companies' market-cap crossing all time high of $4trillion mark. Infact NSE overtook Hong Kong stock exchange to become world's 7th largest exchange by market cap."
In the case of IPOs, Motilal's note said that this market was very vibrant, following the bullish trend in the secondary market. 58 IPOs came to the market for subscription to raise funds worth Rs 48000 crores against 40 IPOs last year (total issue size of Rs 64000 crore). Going ahead to the pipeline remains strong with a sharp increase expected in new-age tech IPOs including Ola Electric, Swiggy, FirstCry, and Mobiwik.
Meanwhile, according to the brokerage, positive Domestic cues got further strength from global factors becoming favourable. The interest rates seem to have peaked out, leading to a decline in bond yields and the dollar index. US Fed in its last monetary policy for 2023 hinted at 3 rate cuts in 2024 which has led to huge optimism globally and other central banks are likely to join soon.
However, it also added that geopolitical tensions created volatility in the market throughout the year though the impact was limited. Off-late attack on the Suez Canal route has led to a surge in oil prices and poses a threat to the global supply chain which in turn could lead to inflationary pressure on commodities and impact earnings.
Taking into these factors, Motilal's note said, "India's macro and micro fundamentals remain strong and is helping the market to scale new highs. Nifty has given returns of 18% in 2023 so far. Despite this up-move, Nifty is trading at a 12- month forward P/E ratio of ~19x, which is at a discount to its 10-year average of 20x.
Moreover, midcap and smallcaps witnessed huge rally with Nifty Midcap100 up 44% while Nifty SMallcap100 surged 54%. PSUs, realty, auto along with several niche sectors like power, defence, shipping, fertilizer, and EMS saw huge buying interest. PSU Banks sharply outperformed private banks as they are now well placed to sustainably deliver 1% RoA and have scope of earnings upgrade.
2024 Top Picks:
As we step into 2024, Motilal's note said, "Several key events next year would have an influence on market. General Lok Sabha Election in May 2024 and first budget post-election would be most important on the domestic front. While on the global front, factors such as economic growth, rate cut, inflation along with geopolitical issues would be the key drivers."
It added, India remains a shining star and is expected to maintain its outperformance. We expect market sentiment to strengthen further as the ongoing pre-election rally is likely to continue. Any rate cut would provide an additional boost to the market. Given the government's focus approach towards long-term capex across key areas, along with expectations of rate cuts globally in 2024, Growth stocks will be in focus.
Accordingly, Motilal's note said, "We expect BFSI, Industrials, Real Estate, Auto and Consumer Discretionary to do well going forward. We believe that over the next couple of quarters, sector rotation could be an important driver along with the overall market uptrend. We also believe valuations will become an important factor in stock selection to drive outperformance in portfolios."
The top 10 picks of Motilal Oswal for 2024 are --
SBI: Target Price Of Rs 700
Hero MotoCorp: Target Price Of Rs 4,480
Spandana Sphoorty: Target Price Of Rs 1,200
Larsen & Toubro: Target Price Of Rs 3,660
Dalmia Bharat: Target Price Of Rs 2,800
Tata Consumer: Target Price Of Rs 1,110
Coal India: Target Price Of Rs 380
Zomato: Target Price Of Rs 135
Oil India: Target Price Of Rs 410
Kajaria Ceramics: Target Price Of Rs 1,580
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
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