In 2023, the Indian stock market rose into an unprecedented eight -year consecutive eight -year company. The Sensex30 index rose 18.74%, and Nifty50 rose 19.42%.From the perspective of market value, the market value of the Indian stock market exceeded the $ 4 trillion mark. From the low point in March 2020, the total market value has increased by about double.

Will the "crazy" of the Indian stock market continue in 2024?

On January 4th, Naimura Bank analyst SaiOn Mukherjee and AMLAN JYOTI DAS pointed out in a report entitled "Looking for India 2024" that the return rate of the Indian stock market in 2024 will reach 12%.24260 points, at the same time warn the market should not be overlavered:

We believe that the reasonable range of the long -term price -earnings ratio of the Indian stock market is 18 times to 21 times, which means that the return rate in 2024 is between 0%and 17%.

Our basic assumptions are: global economic growth has slowed slightly, and the prices of oil and commodities are in a reasonable range. The results of the 2024 election are good for India.In this scenario, we expect India's macro fundamental stability, strong company profitability, and better liquidity support. India's valuation will remain higher than historical level.

However, if commodities and oil prices rise and the results of the election are unfavorable, this will become the main structural risk of the Indian market.Globally, no landing (strong growth, stubborn inflation and higher yields) and hard landing (growth, inflation, and sharp decline in yields) may cause higher risk premium and lower valuation.Varanasi Stock

Nomura believes that the basic trend of the Indian economy in 2024 is slightly slowed down by inflation and the economy.The economic team predicts that the growth of GDP growth in fiscal year from 2024 to 2025 will slow from 6.7%to 5.6%. So far, India's GDP growth rate is mainly driven by government and cities.Rural and private capital expenditures have not yet begun to grow, and the slowdown in global economic slowdown and macro uncertainty may have an impact on the recent growth.

Given that the valuation of the Indian stock market is not cheap, Nomura believes that the current strategy maintains a certain defensiveness. At this stage, the market's expectations of India's growth and inflation balance are based on optimism.And the risk of fiscal deficit:

The optimistic industries include: financial industry (especially banks), medical care, consumer goods, infrastructure, cement, electricity/coal, oil and natural gas, and telecommunications.

The empty industry includes: consumers optional/durable goods, capital goods/national defense, metal, Internet and information technology.Holding a neutral view of the automotive industry.

1. Optimistic emotion support Indian stock market

Nomura pointed out that the optimistic expectations of India's economic growth prospects and corporate profits, the expansion of domestic market participants and the continuous inflows of foreign capital, the possibility of the central bank's interest rate cut, and Modi's re -election have all contributed to the expectations of investors to continue to rise in the Indian stock market to rise.Essence

Nomura believes that domestic and foreign factors in India support the current valuation of the Indian market. The Nifty Index's one -year long -term price -earnings ratio is 19.9 times, which is slightly higher than the average level of 19.6 times in the past three years.In the past three years (fiscal year to fiscal year ~ 2023), the market transaction price is 17 times to 23 times.In contrast, the average value before the epidemic (fiscal 2017 ~ 2019) was 17.7 times. At that time, the trading interval of the market was 16 times to 19 times:

Over the past three years, the spread between profit yields and bond yields has dropped to a lower limit of -2.1%.We believe that except for banks and insurance, the transaction valuation of all industries is higher than the level before the epidemic.

From the perspective of the external environment, the basic assumption of the market is that the US economy is soft, inflation has continued to slow, and economic growth will also slow down. These factors will help maintain the inflow of strong funds in the stock market.Taking the S & P 500 index as an example, the current price -earnings ratio is 19.7 times, which is higher than the average level of 17.1 times before the epidemic.

The spread between profit yields and actual bond yields reduced about 250 basis points to reach the minimum level in the past 10 years.

From the perspective of internal environment, India's stable macroeconomic environment and company's strong profitability expectations will promote the stock market increase.Oil prices are one of the key macro variables in IndiaKolkata Wealth Management. Although geopolitical conflicts have intensified in the past few years, oil prices have remained stable.At the same time, strong domestic capital flow provides stability for the market, thereby reducing the Beta coefficient.

Therefore, in a relatively stable macro background, Nomura expects the Nifty Index's return in the next 12 months will be between 0%and 17%. Considering the strong return of 2023, it is expected that the return in 2024 will be relatively moderate.The target level is 24,260 points, and the potential return is 12%.

And if inflation is more stubborn, resulting in a hard landing or not landing in the US economy in 2024, Nomura believes that the Indian stock market may fall from the current level by about 10%.

2. India's economic growth or slowing down in 2024, but it is optimistic about the mid -term prospectsNagpur Investment

In the report, Nomura discussed the direction of the Indian market on the different impacts of the economy from the high inflation, the ease of inflation, and the significant slowdown of inflation.In summary, Nomura believes that the market is currently expected to have the basic trend of Indian economy in 2024 that inflation and the economy have slowed slightly. In the narrative of strong capital expenditure and relatively balanced import and export in the trading market, the economy is quite tough, and the stock market valuation will remain maintained.High level:

Since this situation has been considered in the stock price, we will choose according to the valuation of each sector.The expectations of our economic team are closer to this situation, but there is a certain downward risk of economic growth.

Nomura estimates that the growth of GDP in India from fiscal year from 2024 to 2025 will slow from 6.7%to 5.6%, which is 6.7%in fiscal 2024.Global economic slowdown and macro uncertainty may have an impact on India's economic growth:

In the context of global uncertainty, the government's passing the growth relay stick to the private sector may be delayed.As the government reduces its fiscal deficit, the government's support for growth may weaken.

If the uncertainty of India's economic growth is resolved, the growth prospects will improve.In view of the following factors, we have a positive attitude towards the prospects of medium -term growth: A. The continuity of the policy after the election; b. In the context of the slowdown of the global economic slowdown, the price of oil prices/commodities is low, which is beneficial to maintaining import and export balance; C.The strong balance sheet of enterprises and banks provides a solid foundation for starting the cycle of private capital expenditure; d. Policy supports the local manufacturing industry.

1. From the perspective of inflation

Nomura pointed out that India's inflation is mainly affected by the impact of supply, and rising food prices will affect the overall inflation rate in the short term.According to Nomura's point of view, the core inflation rate has been basically stable, which allows the Indian central bank to reduce the policy interest rate from August 2024 to cope with slowing growth and synchronize with global interest rate cuts:

It is expected that India's oil and commodity prices will not rise further in the future, and external revenue and expenditure will still be stable. The recent increase in service export exports and remittances supports the balance of regular accounts.We believe that the stable macro environment, moderately slowing economic growth, decline in yields, and the global bond indexes are all good sigs of investment portfolio flow in 2024.

2. From the perspective of consumption

Nomura's expected consumption growth will bottom out in the short term and start recovery. Consumer emotions are returning to the level before the epidemic:

In 2024, we expect that market consumption will be supported due to inflation and interest rates and Indian elections.In the past 60 months, the 29 -month rural wages have increased negatively.Recently, with the help of the decline in inflation rate, actual wage growth has improved.

Under the influence of the "Rural Employment Guarantee Law", the demand for employment in the countryside has declined and employment has improved.Cities consumption is relatively stable and wages have grown rapidly, especially the service industry.As the recruitment momentum slows down, this trend is reversing to a certain extent.

Third, keep a cautious strategy

Nomura pointed out that in 2024, the market began with quite optimistic emotions, but the downside risks of weak growth and inflation should not be ignored. At the same time, the Indian market has expected the results of the 2024 election in advance. In view of thisChoose cautiously, keep cautious, and recommend the choice of investment portfolios to have certain defense:

As in the past two years, the market expects to swing around, and investors must flexibly cope with the changing markets.

From a macro perspective, we are more inclined to the slowdown of global economic growthSimla Investment. The central banks of various countries will take action immediately. However, if the inflation exceeds expected to rebound, the higher neutral interest rates will continue to worry about the emergence of economic hard landing.

This situation will adversely affect the import and export of India.We predict that high inflation will adversely affect consumption, and the continuous uncertainty of economic growth will suppress capital expenditure.This may keep India's future growth.

It is expected that from the mid -term, the profitability of Indian companies will increase compared to the national GDP.

Therefore, Nomura pointed out that they tend to have a relatively moderate valuation stock for the sector of Indian stocks, and the layout is defensive:

Overweight (OW) stance on the following industries/sectors: financial industry (especially banks, consumer necessities/FMCG (fast -moving)), infrastructure, cement, oil and natural gas, medical care, telecommunications, electricity/coal coalEssence

The following industry/sector holds the Underweight (UW) position: Consumers are non -essential/durable consumer goods, capital goods/defense, IT services, Internet, metals.

1. Banking sector: After a periodic rise, it is expected that it will become more stable nextMumbai Stock Exchange

Nomura expects that the Indian banking industry will be in the third consecutive year in 2024, but the rise will be relatively mild this year:

The growth of loans in the banking industry has slowed down. As of mid -December 2023, the year -on -year growth rate of loans reached 16%, and in fiscal year from 2024 to 2025 fiscal year to 13%to 14%.Although the net profit (NIM) bottomed out at the end of the 2024 fiscal year, the basis effect will make the year -on -year net interest income (NII) grow mild, resulting in the growth path of a large bank's core operation profit (PPOP) in the first half of the fiscal year in the first half of fiscal year 2025, And then pick up again.

Although there may be some fluctuations or challenges in the short term, in the long run, we expect that the banking industry will continue to experience strong credit demand growth and can achieve higher returns.The Nifty Banking Index (12%in 2023) is not as good as the Nifty Index (20%in 2023), and partly reflects that periodic kinetic energy is still mild.

2. Non -bank financial institutions: Growing is facing risks, and it is expected that the prospects for medium/small institutions are not good

Nomura said that the growth prospects of non -bank financial institutions (NBFCS) have remained cautious, especially for small/medium -sized non -bank financial companies that highly depend on unsecured loans.

Looking forward to the future, we expect that the Central Bank of India will increase the decision to increase the risk weight of non -guaranteed loans to curb excessive risk accumulation, which will promote one of the following two strategies that rely on non -bank financial companies (NBFC) in this field:

1. Increase yields to protect profitability, which may have a negative impact on loan demand/growth;

2. Sacrifice profitability, maintain loan demand/growth and yields unchanged.

In addition, in other guarantees, we expect that small/medium -sized NBFC will continue to face fierce competition from large NBFC and banks.

3. Insurance: Supervision becomes the focus of industry development

Nomura pointed out that increasing the amount of surrender in the insurance policy (that is, the amount that the policy holder can get when the insurance can be applied) is not good for the industry, but the overall valuation of the industry has not limited downward risk:

The draft issued by the Indian Insurance Regulatory and Development Bureau (IRDAI) in December 2023 proposes to increase the surrender value for non-direct investment-related insurance (Non-LinkedProducts), from the perspective of new business (VNB) profit marginLook, we think this is not good for the industry.

According to the calculation of the draft, the value of surrender to more than 75%was increased by 0%to 50%in the first few years, which will have a negative impact on the profit margin of some products in the insurance company.

Although the exact impact of these new drafts is currently unclear, IRDAI has asked insurance companies to put forward their opinions on the draft before January 3, 2024.We believe that the final implementation of discussions and new regulations will take time, so it may bring uncertainty to the insurance industry during this period.

This article comes from Wall Street, author: Ge Jiaming