Around 19 stocks, constituting 38 percent of the Nifty 50 Index, have recently achieved record highs during the extended bullish trend in the market, indicating a significant portion of the Nifty 50, a benchmark stock index in India, has experienced positive momentum and reached new peaks.
These include companies such as SBI Life Insurance, PowerGrid Corp, Maruti Suzuki India, Nestle India, Tata Motors, L&T, Grasim Industries Ltd, Titan Co, NTPC, Adani Ports and SEZ, ICICI Bank, Sun Pharmaceuticals Industries, Tata Consumer Products, Mahindra & Mahindra, Ultratech Cement, Bharti Airtel, Axis Bank, Bajaj Auto, and Eicher Motors Ltd.
Analysts see a shift in the market dynamics, with a focus on individual stocks rather than broader market indices. This shift indicates significant changes in sectors such as Public Sector Undertakings (PSUs) and banking. Sectors like insurance, healthcare, and auto, which may have been relatively less active during the earlier market surge since April, are now gaining traction due to attractive valuations.
The Nifty 50 reached a new high of 21,005.05, and the Sensex hit a fresh record of 69,888.33. This surge followed the RBI's decision to keep the repo rate unchanged at at 6.5 percent, consistent with market predictions. The RBI's monetary policy committee voted 5 to 1 to continue withdrawing accommodation, aiming to align inflation with the target while supporting growth.
Nifty is experiencing its longest winning streak since December 2020, with six consecutive weeks of gains. The current week's surge of 3 percent represents the best weekly performance since July 2022.
The recent gains in the market can be attributed to various factors, including the BJP's victory in key state elections in the Hindi heartland, positive GDP data, and the return of foreign investors. Additionally, global factors such as a rally in US treasuries, lower oil prices, and anticipation of the RBI monetary policy announcement on December 8 have contributed to the positive sentiment in the market.
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BofA in its latest note foresees a robust Indian macro in fiscal year 2024, predicting the highest GDP growth among G20 nations, fiscal consolidation, reduced government debt/GDP, and a steady rupee. Globally, it expects a soft landing for the US, Fed rate cuts from June '24, manageable crude prices, a weaker USD, and stable bond yields, benefiting emerging markets with a revival in FII flows.
Despite cautious Nifty earnings growth at 12 percent CAGR (FY23-26) compared to the consensus of 15 percent, potential risks include sustaining margin gains and slowing global growth, it said. BofA's outlook suggests Nifty returns ranging from -6 percent (worst case) to +23 percent (best case) in CY24, with a base case of 15 percent returns at 23,000. They anticipate valuations to expand due to improved geopolitics, ongoing reforms, and increased FII flows, contrasting previous outflows during the Fed hike cycle that led to multi-year lows in India equity ownership within Ems, it said.
"Markets could be volatile in 1H24 as debates persist on US hard vs soft landing, India's general elections outcome, geopolitical conflicts' impact on crude and impact on Indian markets from China stimulus", BofA said.
"We would buy potential dips as India is relatively insulated: our analysis suggests DII passive flows alone are sufficient to absorb peak primary raises & FII outflows (hard landing), China stimulus linked outflows reverses in a year and Nifty is less crude sensitive now (low Energy weight & corporates' ability to pass cost push). Hence, we believe sharp corrections or volatility (vs 20% swing in CY23) are unlikely", the report added.
Kotak's report highlights that India's growth outlook hinges on factors like the 2024 general elections, consumption recovery speed, public and private sector spending, geopolitical dynamics, global growth, and the interest rate trend.
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