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Business News/ Markets / Stock Markets/  Nifty 50 set to clock healthy double-digit gains in 2023; what are the key challenges for the market in 2024?
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Nifty 50 set to clock healthy double-digit gains in 2023; what are the key challenges for the market in 2024?

Despite challenges such as high interest rates and geopolitical tensions, the Nifty 50 is set to conclude the year with healthy gains.

After falling nearly 3 per cent in October, Nifty 50 clocked a gain of 5.5 per cent in November and is up 6 per cent in December so far. (Agencies)Premium
After falling nearly 3 per cent in October, Nifty 50 clocked a gain of 5.5 per cent in November and is up 6 per cent in December so far. (Agencies)

Despite facing challenges such as high-interest rates, geopolitical tensions, and persistent inflation, the domestic equity benchmark Nifty 50 is poised to conclude the year with healthy gains. Year-to-date (as of December 22 close), the Nifty 50 is up about 18 per cent, with 48 stocks in the green and only two stocks - Adani Enterprises (down 27 per cent) and UPL (down 19 per cent) - in the red this year so far.

Stocks such as Tata Motors and NTPC have surged 87 per cent and 82 per cent, respectively. As many as 27 Nifty 50 stocks have gained over 20 per cent while 40 stocks have gained over 10 per cent in the year so far.

Most gains for the benchmark index have come since November. Data shows Nifty was just a little over 5 per cent up till October 31 this year. After falling nearly 3 per cent in October, Nifty 50 clocked a gain of 5.5 per cent in November and is up 6 per cent in December so far.

The sharp rebound in the index could be attributed to the return of foreign portfolio investors (FPIs) following the easing of US bond yields and growing talks that interest rates have reached their peaks.

Data from NSDL shows after two months of selling, FPIs pumped in about 24,546 crore in the Indian financial market in November while in December so far, they have invested about 77,388 crore.

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Also Read: Nifty 50 may touch 24,200 next year led by FPI inflows, says ICICI Direct; Federal Bank, Gail among top picks for 2024

Will the party continue in 2024?

The outlook for the domestic market for the year 2024 is positive due to India's robust macroeconomic conditions, anticipated rate cuts, and the prospect of a stable government after the General Elections.

"The RBI has given robust growth projections for FY25 as well with growth averaging 6.5% in the first three quarters of the fiscal. Such optimistic expectations for real GDP growth give space to remain bullish on the market," said brokerage firm Motilal Oswal in a note.

The brokerage firm expects the Nifty EPS (earnings per share) CAGR to be around 20 per cent over FY23-25, with scope for further rerating.

Moreover, the brokerage firm pointed out that with the BJP's sweeping victory in the State elections of Rajasthan, Madhya Pradesh and Chhattisgarh, the confidence of the investors regarding political continuity post-2024 Lok Sabha elections has received a big boost.

The brokerage firm believes this will augur well for macro and policy momentum for India, which, at the moment, is seeing the highest growth among major economies, both in terms of GDP growth as well as corporate earnings. Market sentiment is now likely to strengthen further which was already buoyed by the healthy trend in corporate earnings growth and resilient domestic macros, Motilal said.

Also Read: Market Outlook: 6 key sectors investors should watch out for in 2024

But challenges galore

Even though the Indian market achieved a historic high in 2023 against global peers, there are a few challenges that investors need to watch in 2024.

Deepak Jasani, Head of Retail Research at HDFC Securities underscored global debt-to-GDP, the large size of the G-4 balance sheet, export demand and rural slowdown, El Nino impact expected till June 2024, valuation concerns, shift of money to bonds, political setbacks to the ruling alliance and delayed impact of rate tightening in the US on corporates and businesses across the globe are the main challenges for the market in 2024.

Also Read: Will the Indian market continue its strong run? Here's where experts see Nifty by 2024-end

Prashanth Tapse, Senior VP (Research) at Mehta Equities observed that the majority of the challenges would come from the global stage, be it something on rising global inflation and change in Fed stand on interest rates, an economic slowdown in the US and Russia and unexpected war situations leading to disturbance in global supply chain.

On the domestic front, Tapse pointed out that the Budget, General Election would be the big events to watch out for with any deviations in the majority would change the momentum in the market along with this any slowdown in exports and any downgrades in corporate earnings would carry the risk for equity markets.

"We assume 2024 will be the year of the roller coaster rides where bulls and bears both will see extreme levels of volatility," said Tapse.

Nitin Agrawal, CEO of Torus Oro PMS sees US rates staying higher for longer, General Election outcome and geopolitical issues as three main challenges for the domestic market in the new year.

"The markets are now pricing that US rates are going to come down in 2024. However, if the US inflation remains elevated and the Fed doesn't cut rates, we may see FIIs pulling out money from emerging markets including India. The higher US rates for longer was a base case till a couple of months and this scenario may come back in 2024," said Agrawal.

"The markets are pricing that the current government will be able to get a majority in the upcoming elections, especially after their good performance in the recent state elections. However, the election is a big event risk and markets may remain volatile nearer to elections in 2024," Agrawal said.

Sunil Nyati, Managing Director at Swastika Investmart also believes the interest rates trajectory, election outcomes in India and geopolitical issues may keep the market volatile next year.

"Over the past couple of years, geopolitical uncertainty has persistently posed challenges to global markets. Besides, while the least likely scenario involves a surprise outcome in the upcoming general election in India, any such unexpected development could introduce a significant risk to the current market dynamics. On the other hand, the market is currently pricing in anticipation of more than three interest rate cuts in the USA, coupled with an expectation of a minimal economic slowdown in the country. Any deviation from these expectations has the potential to disrupt the prevailing positive sentiment in the market," said Nyati.

Shrey Jain, Founder & CEO of SAS Online says investors should have measured expectations from stocks after a very good performance in 2023.

"It is better to allocate more to large-cap stocks. Traders need to be prepared to handle volatility and respect stop loss," said Jain.

Read all market-related news here

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 23 Dec 2023, 10:09 AM IST
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