Banking, auto sectors could lift Nifty to 24200 level in 2024: ICICIdirect

Nifty could hit the 24200 level in 2024, driven by heavyweight stocks from the BFSI, auto, cement and healthcare sectors, ICICIdirect has said in its latest Quant Yearly Outlook report.

The Nifty was up by 119.10 pts or 0.56 per cent at 21,379.10 as of 11:30 am on Friday. The Nifty 50 pack was at 21,373.90, up by 118.85 points or 0.56 per cent. Major stocks that gained on the NSE as of 11:51 am were Divi’s Laboratories, Tata Motors, Coal India, Maruti, and Tata Steel. 

“While the Lok Sabha elections in India and the Presidential elections in US may trigger near-term volatility (spike) in the markets, declines are likely to be limited,” ICICIdirect said.

The brokerage firm expects volatility to be sticky around current levels in the coming months, and hence, recommends buying on dips in the first half of 2024. US VIX and India VIX have failed to sustain at higher levels, suggesting the strength of the equity markets.

“Despite trading near highs and gaining almost 7 per cent in the December series, Nifty has delivered ~16% returns so far in the last 12 months, which is relatively on a par with other markets,” it said.

According to the report, FPIs, who have returned to the equity markets since April 2023 as US rates seem to have peaked, bought almost ₹1,61,000 crore till August 2023. Higher FPI flows were seen in the capital goods, auto and power sectors, while IT and metals remained subdued.

On the capital front, FPIs flows could increase further in the upcoming calendar year and US rate cuts should induce capital flows, the report said.

The market has witnessed continued FPI flows for almost five years from 2010 to 2014 as the US Fed has maintained zero interest rates following the 2008 crisis. The free money has helped risk assets outperform the market, the brokerage said.

Sectors to attract FPI inflows

The banking sector stocks have largest headroom to absorb FPI inflows, while the metals sector would likely outperform in CY24. The bank nifty was the major driver of the bull run in the 2012 to 2020 cycle.

“We expect fresh flows to continue in the healthcare space, which should trigger a further outperformance in the months to come,” it added. Infrastructure sector should remain firm. Although financial services has been a relative underperformer, ICICIdirect said recent data suggested a change in the trend as the sector seems to be attracting FPI flows.

“Construction related stocks have seen continued outflows and heavyweights from the sector have relatively underperformed the market. However, due to interest rate cut expectations, fresh flows are likely in CY-24, which should propel an outperformance from the sector,” it said.

The rupee has been resilient against the dollar in recent months. Commenting on the dollar index, ICICIdirect says, “we expect the dollar index to weaken further and capital flows should be seen in emerging markets. Historical evidence suggests that India would be a major beneficiary of these flows.”

As per ICICIdirect, recommended stocks include: Dalmia Bharat Cement, Federal Bank, GAIL, Hindustan Copper, IPCA Lab and Shriram Finance.

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