Market Outlook – January 2024

“Knowing when to stay out of the markets is as important as knowing when to be in them.”Mark Weinstein (US Financial Expert)

As we embark on the new year, we extend our warm wishes for a very Happy and Prosperous 2024!

2023 has been a year etched in gold for our nation, a vibrant tapestry woven with countless threads of progress. The Indian economy has remained resilient in the face of global uncertainties on the back of strong structural drivers, macro stability, strong domestic demand, and responsible fiscal governance. This has been reflected in the robust growth of sectors like automobiles, engineering, and infrastructure. The ‘Make in India’ initiative has gained impressive momentum, propelling us closer to our vision of Atmanirbhar Bharat. These cumulative advancements directly contribute to the booming stock market, attracting increasing participation from investors. We are optimistic that this trend will continue in 2024, fuelled by India’s projected trajectory towards becoming a $5 trillion economy.

Over the last three years, we have seen an inflation-led interest rate hike globally. It appears though that interest rates have peaked and there is a possibility of rate cuts in the second half of the year. As global growth remains muted, with commodity prices stabilising and the demand-supply dynamics normalising, it further supports the rate view. This in turn can lead to the flow of funds into emerging markets and India could be a likely beneficiary given its positive growth forecast.

As we enter 2024, the market has seen an 8% gain in December, an 18% return in the last two months, a 20% return in 2023, and a 57% gain in nine months from the low of March.

On the domestic front, the incumbent BJP’s sweeping victory in state elections has improved prospects of political continuity in 2024 general elections. This augurs well for macro and policy momentum in India, which at the moment is seeing the highest growth among major economies (in terms of GDP and corporate earnings). All these factors have led to an upgrade in India’s rating and GDP growth forecast by various global firms. As a result, the market cap of BSE-listed companies has crossed the USD4t mark, and NSE has overtaken the Hong Kong Stock Exchange to become the world’s 7th largest exchange by market cap.

What to look forward in January

  • Q3 results will set the tone for further rally. We expect it to be neutral calming down markets.
  • Expect Crude Oil to rebound. Tensions in Red Sea wherein terrorists attacking merchant ships will create roadblocks for smooth movement hampering supply, thus spike in oil prices.
  • Inflation nos. expected to remain constant at same levels that means no immediate rate cuts by central banks in India as well as in US.
  • Overall, post BJP Victory markets have discounted a BJP win with December rally. Valuations are now touching over-valued zone. Q3 results will rebalance the Price vs Earnings difference and consolidate.

We expect markets to correct in January. Hence, we recommend new funds purchase towards 100% Debt allocation at present. We also recommend booking 20% profit, booking on the overall portfolio, and shifting same to Debt funds.Happy Investing!

Mushtaq Kazi
Mushtaq is the co-founder of Mushtaq has had corporate stints with Kotak Securities & IIFL group. He holds an MBA degree from Pune University.
His interests include cooking & gardening. When he is not cooking or gardening, he is writing.