Tech stocks power market to new high
₹1.84 trillion and ₹1.71 trillion in the previous calendar year . The outlook for equities remains strong, though returns are expected to moderate in 2024 as markets price in a tempering of inflation and likely policy continuity with an expected victory of Bharatiya Janata Party in the upcoming national elections.
“Returns from Indian equities are likely to be more moderate than in the recent past (20% Nifty rally in 2023)," notes Abakkus Asset Manager, which expects low to middle teen returns. “Volatility and wild swings have and will continue to be a part of equity markets and story-based and momentum-based investing might look exciting, but will probably end sour," Abakkus said in a report.
Risks to the downside emanate from persisting inflation which could make rate cuts by the RBI more challenging and keep the cost of money for corporates high and impact earnings. Data released by the government on Friday evening showed IIP growth in November decelerating to an eight-month low of 2.4%, while retail inflation in December grew by 5.69%, the most in four months.
“Investors are hoping that likely rate cuts by the Fed later this year would improve the scenario for IT companies," says Prashanth Tapse, senior VP (research), Mehta Equities. JM Financial Institutional Securities analyst Abhishek Kumar maintained a Hold recommendation on both TCS and Infosys, setting price targets at ₹3,840 and ₹1,480, respectively.
The outlook for TCS includes a projected -1.1% quarter-on-quarter (q-o-q) dollar revenue growth, with expectations of 24bps expansion in EBIT (earnings before interest and taxes) margin led by lower sub-con expenses, better utilization and currency benefits. Similarly, for Infosys, a -1.1% q-o-q dollar revenue
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