Nifty 50 may touch 24,200 next year led by FPI inflows, says ICICI Direct; Federal Bank, Gail among top picks for 2024
- The Nifty has a tendency to extend the move towards mean+3 sigma levels after crossing life highs. Heavyweight stocks from BFSI, Auto, Cement and Healthcare should lead Nifty towards 24,200 levels in CY-24, said the brokerage.
The Indian stock market indices, Sensex and Nifty 50, are trading near their record high levels. The benchmark Nifty 50 has delivered around 16% returns so far in the last 12 months, which is relatively at par with other markets.
ICICI Securities is bullish on the Indian markets and has a target of 24,200 for Nifty 50 in the calendar year 2024 driven by foreign fund inflows.
“The Nifty has a tendency to extend the move towards mean+3 sigma levels after crossing life highs. Heavyweight stocks from BFSI, Auto, Cement and Healthcare should lead Nifty towards 24,200 levels in CY-24,” said Pankaj Pandey, Head Research, ICICI Direct in a report.
The brokerage firm expects volatility to be sticky around current levels in coming months. Hence, in the first half of 2024, ICICI Direct suggests investors to adopt the “Buy on dips” strategy.
Indian indices made fresh life highs in December 2023 and were among the best performing markets. The outperformance was aided by resumption of foreign flows which was highest among peers.
“The net flows for the current calendar year is nearly $20 billion while the rest of the emerging markets have seen nominal flows. In the post covid era, while most of the markets are still reeling near their 2021 highs, Indian markets have given significant returns,” ICICI Direct report said.
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The calendar year 2023 saw resumption in FII flows as interest rate peaks and expectations of rate cut sets in. Fresh flows were seen as the market anticipated a halt and then gradual decline in interest rates. Earlier in CY-22 we saw severe pullout from FPIs as the US Fed accelerated interest rates to historical highs, the brokerage firm noted.
Meanwhile, the dollar index has started losing its steam after the Fed hit a pause button in September. Recently, it also signaled the end of policy tightening and cuts in 2024. Currently, the Fed is guiding three interest rate cuts in 2024 while the market is envisaging up to five cuts next year.
“As a result, we expect the dollar index to weaken further and capital flows should be seen into emerging markets. Historical evidences suggest that India should be the major beneficiary of these flows,” the brokerage report said.
Among sectors, ICICI Direct expects fresh flows to continue in the healthcare space which should trigger further outperformance in the months to come. With a declining interest rate cycle, stocks from financial space are also expected to garner more interest from FPIs.
Interest rate cut expectations may also lead to fresh flows in the construction and metal sectors in 2024 which should propel the outperformance from these sectors.
Meanwhile, ICICI Direct expects Shriram Finance and Bharat Electronics to be probable candidates to replace UPL and BPCL in Nifty 50 index for the coming rebalancing next year.
ICICI Direct also listed out its Quant Picks for 2024. These stock picks are Dalmia Cement, Federal Bank, Gail India, Hindustan Copper, IPCA Laboratories and Shriram Finance.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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