India: Cynosure of all eyes!
Indian equities was clearly an outperformer compared to most global peers in CY23, more in mid and large cap space. Interestingly, this was amidst geopolitical tensions, rise in key policy rates across the globe and volatile commodity prices. Domestic economy, nonetheless, was resilient all across this time frame with revival in private capex cycle, robust infrastructure spending by government, record GST collection & most importantly margin expansion led healthy high double digit corporate earnings growth.
As we embark on CY24, there are greenshoots in the form of continued corporate earnings momentum domestically, healthy GDP growth, benign commodity prices outlook as well as likely rate cut globally. Thus, there seem to be more positive than negatives ahead. Amidst this setup, India is in a sweet spot vis-à-vis global peers with macroeconomic stability and corporate earnings in sight. The key risks for CY24 that may get manifested in the form of a) Global growth slowdown, b) Escalated Geopolitical tensions (if any) and c) Any negative surprise from Covid erupting once again
Some of the themes for CY24 are
• Capex Cycle – combination of Core Sectors, green growth and PLI
• Cement – Healthy utilisations likely amid expanding capacity
• Steel – capacity to double amid green focus
• Auto Sales – premiumization trend getting stronger
• Banks – back on strong footing
• Real Estate experiencing decadal revival
Nifty fair value pegged at 25000
Corporate earnings recovery has been healthy in the recent past with Nifty earnings growing at 22% CAGR over FY20-23. Going forward, introducing FY26E, we expect Nifty earnings to grow at a
CAGR of 16.3% over FY23-26E.
Our Dec 2024 target for Nifty is set at 25,000 wherein we have valued Nifty at 20x PE on FY26E EPS of ₹1,250/share with corresponding Sensex target set as 83,250; offering a potential upside of ~15% from current index levels