What Makes Indian Stocks A Bulls Ark In Global Market In 2024?

India is not just making headlines with its robust economic growth prospects and policy reforms, but its stock market is already hitting new milestones. The latest feather of achievements in the Indian market's cap is becoming the fourth largest equity market globally, outrunning neighbouring country China's Hong Kong market. Indian market is currently investors' eye candy for investments. And despite being overvalued already, the Indian market has only scratched the surface of the bull's ark!

As per the latest data from Bloomberg, the combined value of shares listed on Indian exchanges touched $4.33 trillion as of January 22, 2024, surpassing Hong Kong's combined market value of $4.29 trillion. This makes India the fourth-largest equity market in the world of equities.

Indian market's valuation crossed the $4 trillion mark for the first time on December 5, 2023. Half of this mark was achieved in the past four years, making it a beacon of success after the pandemic.

What makes the Indian market so special?

Indian stock market is resilient! Time after time, Indian equities have shown the ability to thrive at times of chaos, destruction, challenging environment and tensions both economically and politically on a global level.

What Wall Street did yesterday, the Indian market has been on a super ride of back-to-back record highs.

On Monday, Dow Jones and S&P 500 touched an all-time high of 38,109.20 and 4,868.41 respectively. Sensex and Nifty touched their last lifetime high of 73,427.59 and 22,124.15 in the initial days of 2024, after a long-monthly bullish trend in December 2023. Before the world market witnessed Santa Rally, Indian Stocks celebrated Christmas the entire last month of 2023.

The success that the Indian market is now at is a making of many years.

From a mustard seed back in the early 2000s to becoming a mountain, the Indian market has shown its potential from the very start.

Indian stock market escaped the direct impact of the great recession of 2008 for its classic old traditions. More savings in traditional schemes, and non-exposure of its banking system to mortgage-backed securities.

Time skip, India showed yet another resilience during the time of the pandemic, becoming a haven for foreign investors with its huge contribution by providing vaccine to the world. Indian Stocks were a darling of investors, still are! In 4 years, Sensex's lowest level stood at 25,638.90 that was recorded on March 24, 2020, just a day before the first wave of nationwide lockdown that came into effect. But by the time the year 2020 ended, Sensex had nearly doubled to 47,751.33, registering a growth of 86% in 10 months.

India survived two back-to-back geopolitical tensions, one even led to extreme inflationary pressure and aggressive rate hikes. At first, it was Russia's invasion of Ukraine in 2022, and the second followed in late 2023 in the heart of leading world oil producers, the Middle East between Israel and Hamas.

For example, when in 2022, FIIs carried record high sales in the Indian market to the tune of Rs 2.78 lakh crore, DIIs were quick to save and offset this impact by making record high buying of nearly Rs 2.77 lakh crore. Foreign institutional investors were also net sellers of 2023, however, there was a sharp decline in outflow compared to 2022 as Sensex and Nifty touched record-high levels. FIIs sold Rs 16,510.59 crore in Indian stocks, and DIIs made yet another strong inflow of Rs 1.85 lakh crore.

2024, Indian investors have continued to lift the stock market. According to Motilal Oswal Financial Services, the total number of demat accounts increased to 139m in Dec'23. New account additions surged to 4.2m in Dec'23 versus average monthly additions of 2.1m in FY23.

Also, Motilal's report highlighted that the Nifty50 ended the calendar year 2023 above 21,700, with 8% MoM gains in Dec'23. Overall ADTO volume was buoyant at INR401t (up 18% MoM), with F&O ADTO increasing 18% MoM and Cash ADTO surging 43% MoM. Overall retail ADTO jumped 20% MoM to INR153t, with retail F&O ADTO up 20% MoM and retail cash ADTO up 47% MoM (INR477b).

Meanwhile, in mutual funds, inflows in SIPs have stayed above Rs 17,000 crore for the past two consecutive months. In December, inflows were at a record of Rs 17,610 crore. So far in FY24, SIPs inflow stood at Rs 1,41,923 crore. Indian Mutual Funds have currently about 7.64 crore (76.4 million) SIP accounts through which investors regularly invest in Indian Mutual Fund schemes.

Net asset under management in India is currently at Rs 50,77,900.36 crore as of December 31, 2023.

In 5 years, Sensex has gained by a whopping 34,794.73 points or 96.58%, while Nifty surged by 10,597.95 points or 98.31%. This is compared to the Dow Jones Industrial Average which has rallied by 13,264.61 points or 53.62% or Japan's Nikkei 225 which records an upside of 15,744.01 points or 75.79%. China's economic conundrum amidst pressure in realty development has led to a dull performance in its stock exchanges. SSE Composite Index has only risen by 6.51% in 5 years, while Hong Kong's Hang Seng has rather declined by 44.24%.

The US, Japan and China are currently the top stock exchanges in the world. India has the potential to step into the big three!

What about 2024?

More Bulls For Sensex And Nifty!

As per Emkay Global, the key themes for 2024 are --- Rate cuts dominate conversations for CY24, to which the brokerage believes the Fed would cut in 3QCY24 and RBI would follow suit almost immediately. This would drive a re-rating in the markets which would be visible more in SMIDs than the Nifty.

Further, it said, a BJP win in the April-May national elections is almost a done deal and the focus is on the FY25 budget, with manufacturing and infrastructure the key themes. It added, " We also see the possibility of a recovery in mass spending. This is not certain, but we think it is worth taking some exposure to play this."

Emkay's 2024 year-end Nifty target is 24,000 which imputes an 11% return for the benchmark, while it expects SMIDs to outperform. It added, "Our model portfolio focuses on large-/mid-caps and we are UW on Financials and OW on Consumer Discretionary."

Jefferies sees continued strength in the Indian market. Its note said, "resurgence of a multi-year capex upcycle implies robust 6-7% GDP growth over the next 5-7 years. The potential slowdown in Govt capex in the upcoming budget is not a worry. Foreign investor positioning on India is light & CY24 should see greater inflows which should help banking stocks. We like domestic cyclicals viz. banks, power, telecom, industrial, property."

Is there a possibility of Nifty at 25,000 in 2024? It is possible!

In its note, Antique Stock Broking said, "2023 was a phenomenal year for Indian equities (now ranked the fourth largest equity market globally). Largely attributable to the positive surprise in terms of domestic macros leading to strong inflows both from domestic & foreign investors. Antique's model portfolio outperformed the Nifty 50 by 760 bps in 2023, primarily driven by our strong conviction about the capex cycle revival, a position that now clearly stands vindicated (industrials & real estate were our key overweight sectors). 2024 is likely to be an extension of 2023 with similar themes playing out."

Antique added, "Our revised FY24/ FY25/ FY26 Nifty 50 earnings stands at 970/ 1,098/ 1,262 (implying FY25/26 earnings growth of 13%/ 15%) respectively. Accordingly, our Mar'25 Nifty 50 target stands at 25,000 (~15% upside) based on 20x (as compared to the earlier 19x) FY26 EPS."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, 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.