HSBC MF cautions against high return expectations in 2024; picks 5 sectoral themes
The Nifty50 continues to trade at 19.8 times its 1-year forward P/E based on the consensus earnings. On a 10-year basis, the index is still trading 10% above its 10-year mean valuation, says HSBC Mutual Fund.
Valuations in the midcap and smallcap space are much more elevated.
They are trading 33% above their 10-year mean valuations.
“We would, therefore, caution against high return expectations. However, we remain constructive on Indian equities supported by the more robust medium-term growth outlook,” the fund house said.
Sectors/Themes To Play
The fund house expects India’s manufacturing sector to maintain a strong medium-term growth trajectory as the underlying drivers continue to strengthen.
Localisation thrust and global supply chain re-adjustments are driving capacity addition in manufacturing across verticals, it said. It also expects the government’s thrust on infrastructure to continue.
“Rising power demand, buoyant capital markets and need to reduce carbon footprint are likely to drive growth in private investments into renewable energy,” the fund house said.
The government’s production-linked incentive (PLI) scheme is helping manufacturing capacity in areas like renewable energy, electronics and other new technology areas.
The other sector that is expected to do well according to the fund house is real estate.
The sector remains another strong medium-term growth driver having weathered the impact of higher interest rates.
With a pickup in the investment cycle, credit growth is expected to get further support in 2024.
“We believe the banking system is now well prepared to support this as asset quality is now strong and has continued to improve,” the fund house said.
Finally, it also expects an
