A lot has changed since last Diwali. Inflation has eased significantly and major central banks in the world have paused their rate hikes. While the Russia-Ukraine war continues, the Israel-Hamas war has raised fresh concerns that it could damage the efforts of central banks to bring inflation under control.
The Samvat 2080 is not going to be a smooth ride for Nifty 50. While uncertainty on the geopolitical front remains a concern, on the domestic front, General Elections, inflation and interest rate trajectory are the key factors that will influence the market.
“The Nifty 50 faces potential challenges in the next Samvat. While it currently boasts a TTM (trailing twelve months) PE (price to earnings ratio) of 22.8, contingent on Bloomberg’s estimates of 18 per cent earnings growth in the calendar year 2024 (CY24) and 12 per cent in CY25, valuations remain justified. However, a slowdown in earnings growth, for any reason, could undermine these valuations,” said Anita Gandhi, Director, Arihant Capital.
(Exciting news! Mint is now on WhatsApp Channels. Subscribe today and stay updated with the latest financial insights! Click here!)
Politics and global economic climate will remain top factors for the market in the next Samvat. The performance of the Nifty 50 is susceptible to political stability.
“Any political turmoil or unfavourable international conditions can adversely affect valuations. As always, the market is susceptible to unforeseen events, emphasising the need for diversification and risk management. In the upcoming year, investors must vigilantly monitor earnings, sector-specific developments, political stability, global influences, and unexpected challenges to navigate successfully,” said Gandhi.
Also Read: Samvat 2080: Date, timing and significance; all you need to know
The fight against inflation continues in the world and due to geopolitical tensions, there is much uncertainty about interest rate trajectory and global economic growth.
As Deepak Jasani, Head of Retail Research at HDFC Securities pointed out that the central bankers, finance ministries, as well as investors, may struggle with inflation that has been sticky so far (led by supply issues in commodities) and the resultant high interest rates. If this situation is not resolved soon, a global economic slowdown cannot be averted.
Also Read: Diwali 2023: Where do experts see gold prices in Samvat 2080?
Jasani underscored that the new conflict in West Asia (Israel-Hamas) in addition to the existing Russia-Ukraine conflict could divert resources, and attention and curb the risk appetite of investors globally.
“Going forward, we expect markets to be volatile till the first half of 2024 even as the outcome of state and central elections will be watched closely as would be the repercussions of the two geopolitical events. Though the local fund inflows have remained robust, we would need a resumption of FPI flows once the global risk appetite revives,” said Jasani.
“We continue to favour domestic-oriented businesses and favour opportunities in sectors like materials, pharma, oil and gas, small finance banks, petrochemicals, consumption, power EPC and restructuring plays for the next year,” Jasani said.
Manish Chowdhury, Head of Research at StoxBox believes for the next Samvat, global factors may play a more crucial role rather than domestic factors in deciding market direction.
“With interest rates in the US hovering near multi-year highs, it would be prudent to keep a close eye on the after-effects, especially the banking and housing sectors which may feel the heat going forward,” said Chowdhury.
“Also, a slowdown in Europe, property market headwinds in China and geopolitical tensions will lead to further volatility. On the domestic front, the structural story looks in place, but the sentiment of FIIs will be crucial to keep the markets afloat at rich valuations. Also, any unfavourable outcome of general elections in India, which looks unlikely, has the potential to create downside risks for markets,” Chowdhury said.
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.
Milestone Alert!Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.
Download The Mint News App to get Daily Market Updates.
Updated: 06 Nov 2023, 06:24 PM IST
