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tailwinds of a remarkable year and handsome investor returns, Indian equities are set for an eventful journey in 2024, with a slew of local and global cues -- varying from interest rates to Lok Sabha polls to geopolitical happenings.
Analysts are of the view that the bull run in the domestic equity market will continue, and over the next 3-6 months, the benchmark indices -- Sensex and Nifty -- could climb up to 7 per cent.
In 2023, the 30-share BSE Sensex jumped 11,399.52 points or 18.73 per cent, and the NSE Nifty climbed 3,626.1 points or 20 per cent.
Lok Sabha elections, the US Presidential polls, the trajectory of interest rates, particularly in the US and India, inflation trends and geopolitical situation will be the key factors for the stock market, analysts opined.
Experts said the return of the BJP government with a majority in the 2024 general elections is a pivotal factor on the market's wishlist for the new year.
As political stability plays a significant role in shaping market dynamics, the market's optimism hinges on a smooth and decisive outcome in the upcoming elections, fostering an environment conducive to sustained economic growth and prosperity in 2024, an expert said.
A note by Motilal Oswal Broking and Distribution said that Lok Sabha elections and the first budget post-election would be most important on the domestic front.
"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," it said.
Dalal Street investors added a whopping Rs 81.90 lakh crore to their wealth in 2023 amid a raft of positive factors, including strong domestic macroeconomic fundamentals, political stability owing to the BJP's success in recent elections, optimistic corporate earnings outlook, signals from the US Federal Reserve about three prospective rate cuts next year and heavy retail investors participation.
"India continues to be the fastest growing economy in the world, and BJP's win in recently-held state elections has further boosted investors' sentiment.
"With macroeconomic factors beginning to turn positive, falling US bond yields have once again fuelled robust foreign fund inflows into the Indian market.
"Along with that, sliding crude oil prices are likely to keep inflation under check, all of which should augur well for Indian equity markets going ahead.
"Hence, the rally in the market is likely to further continue over the next 3-6 months, and Sensex and Nifty could see another 5-7 per cent appreciation, while midcap and smallcap indices may witness another 10-15 per cent jump," said Rakeshh Mehta, chairman of Mehta Equities Ltd.
Parth Nyati, the founder of the stock trading platform Tradingo, said that in 2023, domestic investors took the lead, steering the market to success.
"As we transition into 2024, there is anticipation that foreign investors will join the momentum, particularly with the decline in US bond yields and weakening of the dollar index.
"The prevailing expectation of a cut in interest rates in the USA further bolsters this shift," Nyati said.
On the market wishlist for the next year, Nyati said the market fervently hopes for the absence of any negative surprises from the global markets that could potentially disrupt the optimistic sentiment among Indian investors.
There is a collective expectation for foreign investors to re-enter the Indian equity market with renewed vigour, contributing to the overall positive trajectory, Nyati added.
The experts said investors' immediate focus would be on third-quarter earnings, and any deviation in earnings would be a reason for markets to go into profit-booking zone.
Mukesh Kochar, National Head of Wealth at AUM Capital, said the US interest rates and FII flows will be crucial and added that stability of crude prices will also be important.
The market will also look forward to the stability of geopolitical factors, and any settlement in war can bring a major boost to infrastructure-led development, he added.
"In 2024, the Indian economy will continue to stand out, especially against the challenging backdrop of other emerging economies.
"We firmly believe that India will continue its growth momentum in the year ahead and remain the land of stability against the backdrop of a volatile global economy.
"The bolstered balance sheet strength of corporate India and the significantly enhanced health of the Indian banking system are positive factors.
"These elements are poised to facilitate Indian equities in achieving double-digit returns over the next two to three years, supported by robust double-digit earnings growth," said Pranav Haridasan, MD and CEO of Axis Securities.
Indian equities had a dream run this year where the benchmark indices reached many milestones.
The combined market valuation of all listed companies on the leading stock exchanges BSE and NSE reached the $4 trillion milestone for the first time on November 29 and December 1, respectively, this year.
"The outlook for the Indian equity market in 2024 is optimistic yet cautious.
"Anticipated 6.5 per cent economic growth in fiscal years 2024-25 positions India among the fastest-growing economies globally.
"While the Fed is expected to implement three interest rate cuts, the RBI may hold rates at 6.5 per cent," said Palka Arora Chopra, Director of Master Capital Services Ltd.
According to Chopra, banking, financial services, infrastructure, capital goods, cement, realty and renewables sectors are likely to remain in focus in 2024.
In the first week of 2024, PMI (Purchasing Managers' Index) data for the manufacturing and services sector will remain in focus.
Auto companies would also remain in focus amid monthly sales data announcements.
"The US Fed will on January 4, 2024, release the minutes of the Federal Open Market Committee meeting held in December 2023," Pravesh Gour, senior technical analyst at Swastika Investmart Ltd, said.