Outlook 2024: Valuations, earnings, pre-election optimism to fuel Indian stock market, says Standard Chartered

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BSE Sensex delivered returns exceeding 18% over the course of the year. Notably, the broader markets displayed remarkable outperformance, with the Nifty Smallcap 100 index surging over 54% and the Nifty Midcap 100 recording a robust increase of more than 45% in 2023. As the financial landscape transitions into the new year, analysts at Standard Chartered have upgraded Indian equities to Overweight.

Their optimism stems from the expectations that equity markets will continue to ride the positive momentum with bond markets offering attractive real yields. Also Read: Stock market in 2023: Here are 10 key milestones achieved by Indian stock market this year “India’s strong domestic growth momentum, up trending earnings cycle and robust fund inflows are likely to off-set above average valuation premiums. Further, pre-election optimism amid expectations of government and policy continuity, are tailwinds for equities.

Within equities, we are overweight large-cap equities given better margin of safety in terms of earnings and valuation. We prefer value-style equities," Standard Chartered said in a report. According to the report, Indian equities continue to be supported, at least in H1 2024, by strong positive drivers.

Here are the factors: India’s earnings remain resilient post a decade long down-cycle from 2011-2020. As per Bloomberg consensus estimates, Nifty 50 index EPS is expected to grow by 14% and 16% in FY2024 and FY2025. Overall, EPS growth of ~18 between FY2020-2025, makes the current cycle the best since the 2004-08 period, the report said.