Daily Voice | This equity expert predicts volatile year ahead, suggests not to hope for 20% gains on Nifty

Jimeet Modi is the Founder & CEO at SAMCO Group

It's is going to be a year of volatile trade, says Jimeet Modi, founder and chief executive of SAMCO Group, and investors should not go into this year with the expectations of a rerun of 2023.

Modi believes 2024 will see the reign of select smallcaps and midcaps. "We anticipate that 2024 will be a stock-pickers' market and not just yet another broad-based rally in the space," he says in an interview to Moneycontrol.

The chartered accountant, with over 15 years spent on equity research, investment analysis, and technology, thinks the only bigger risk factor that one must constantly watch out for in 2024 is the re-emergence of inflation. Here's a look at what the ace equity expert says...

After a 20 percent rally in 2023, do you expect the benchmark indices to clock similar kind of returns this year too?

While 2023 was fantastic, it will be foolish to expect a linear 20 percent growth or return every year. In fact, we expect the 2024 to be volatile on the grounds that there are going to be various factors that will impact the markets. There are going to be several changes in the interest rates going ahead in 2024, then you have major elections taking place in important countries like the US and India and the outcome of which will be unknown.

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So, 2024 is going to be a volatile year and investors should not go into this year with similar expectations like the way 2023 closed. Further, we had almost eight years of consecutive positive returns in the Nifty in calendar year (CY) terms, so it will be again too much to expect that the dream run seen in 2023 will continue on a perpetual basis.

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With a 20 percent rally and most of gains coming in between April and December 2023, do you think most of positive news fully priced in by now?

With the recent rally that began from December 4, 2023, I think the markets have by and large priced in the fact that in India, the current dispensation at the Centre will be voted back to power for the third consecutive term in the general elections scheduled in May 2024. Whatever uncertainty was there in the market earlier, got settled with the outcome of five Assembly elections held in November 2023. Based on the outcome of these elections, the markets have discounted that the current government at the Centre will be voted back to power in 2024.

To a large extent, with the US Fed’s so-called pivot, where they have gone ahead and said further rate hike is not going to happen and they have said that there will be a pause before further rate cuts. So, by and large, substantial positive news seems to have been factored in.

Also, will 2024 be another robust year for midcaps and smallcaps?

I think 2023 was a year in the market where everything, including smallcaps and midcaps went up. There was an up-move in this space across the board.

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I think 2024 will be a year of select smallcaps and midcaps. We don’t see a broad-based rally in small and mid-cap space, where you pick up anything from the space and that will go up 30-100 percent. We anticipate that 2024 will be a stock-pickers market and not just yet another broad-based rally in the space.

Do you think there will be no major risk factor that can put the market severely on the backfoot in 2024, though valuations are on the higher side?

The only bigger risk factor that one must constantly watch out for in 2024 is the re-emergence of inflation. The trend has been reversing on the inflation front since last nine to 12 months. We have seen consecutively lower readings on the US CPI numbers but if there is a change in the trend in the US and if it once again starts its upward trend, then the Fed’s stance on rate pause and rate cut will also be reversed, which could result in the reversal of bullish trend.

Now the biggest risk factor for the inflation and the interest rates to go up is, if there is a pressure on fuel prices, which could happen only if there’s some geo-political tension. So, if there is some larger geo-political pressure that breaks out in 2024, like we had a Russia-Ukraine war in 2022, Israel-Hamas was in 2023, which puts pressure on fuel prices-Gas prices etc, than this whole rally could get punctured.

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Themes that you are betting on for 2024...

I think the premiumisation of the Indian consumer story is one of the theme and trend that can be played by premium real estate players. So, we are seeing a big trend of premium real estate home buying by the upper middle class, the aspirational Indian consumers. The theme of premiumisation of Indian consumer can also be seen in the premium segments of the FMCG sector like Liquor and Alcohol, so on and so forth.

The other theme we are betting on is continuing theme of financialization of savings. As more and more savings find its ways in capital markets and mutual funds, the themes like companies in the capital market segments, asset management companies (AMCs) and wealth management companies (WMCs) will continue to do very well because of increasing investors’ interest.

Technology will be interesting theme for 2024, if interest rates actually end up falling and there is a soft landing in the US, as being anticipated. In 2024, Technology sector will have tail wind because of reduction in interest rates as well as cost optimisation, because of this new trend of Artificial Intelligence (AI) being played out.

Do you expect the FII flow to peak in 2024 considering healthy economic and earnings growth?

So, our sense is that the FIIs money has more to do with global cost of money and interest rates rather than economic and earnings growth. In FY22 and FY23 also, Indian corporate sector had one of the best earnings growth but it’s not that the money was flowing in.

If interest rates reversal happens and let’s say 10-year bond yields in US goes to sub 3 percent or settles around 3.25-75 percent, and money market doesn’t look that lucrative, then there will be hunt for better opportunities and better assets. In that case, the emerging markets will get higher allocation and as a consequence of that, India will get higher allocation.

At this moment, because the US interest rates are expected to fall, we do expect that the FIIs flows in India in 2024 will be healthy.

What about the primary market? Do you think there will be higher mop-ups from IPOs this year, compared to last?

The year 2023 was a blockbuster year for the IPO market. If 2024 is going to be as volatile as we discussed earlier, then we believe that only good quality companies and IPOs will be able to sail through. At this moment, the market has become extremely euphoric and exuberant such that any IPO, even the one from the SME segment gets heavily oversubscribed, which is not the sign of healthy market.

We believe that in 2024 this euphoria will die down substantially and once it happens, while the amount and the value of the IPOs may be as same as that of 2023, the quality of IPOs hitting the market will have to be lot better than 2023.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.