Elections, inflation, earnings among top 5 factors that will dictate market trends in FY 2024

Benchmark equity indices BSE Sensex and NSE Nifty were influenced by factors like global economic conditions, geopolitical risks, outflows by overseas investors and many more in FY2023. Market watchers believe that any projection for FY24 should be taken with caution due to the ongoing uncertainty in the domestic and global stock markets. Where the 30-share Sensex inched higher by 0.72 per cent in FY23, the 50-share index Nifty declined marginally by 0.60 per cent during the same period.

Based on the current market conditions, analysts think that the domestic equity markets could experience some volatility in the short term. However, in the long run, the Indian equity markets are likely to remain attractive for investors due to the country's strong economic fundamentals and growth prospects.

At this point, Sonam Srivastava, smallcase manager and Founder of Wright Research recommends a diversified investment portfolio that aligns with your financial goals and risk tolerance, rather than setting specific targets for the Sensex and Nifty. Market watchers also list a couple of factors which will influence the market's direction in the coming year. This includes:

Inflation: Srivastava believes that the rate of inflation will have a significant impact on the market as it affects interest rates, corporate earnings, and investor sentiment.

Gurmeet Singh Chawla, Director, Master Capital Services said, “While RBI continues to stabilise the inflation rate by increasing the overall repo rate, the consumer demand might also take a hit. Keeping this in view, government policies and international cues are going to be the dominant factors driving the market.”

Geopolitical Tension: Political instability and tensions between nations can cause market volatility and affect investor confidence.

Indian Political Climate: The outcome of upcoming state elections and the general election in 2024 will impact the market sentiment and the government’s economic and investment policies.

FED Rate Hikes: Any decision by the US Federal Reserve to hike interest rates can impact the global economy, including India. Divam Sharma, smallcase manager and Co founder, Green Portfolio said, “Interest rates will be one of the key factors which will impact the markets. We are seeing a dilemma from the Fed and ECB on ensuring a balance between reducing inflation, maintaining financial stability and minimising damage to growth and unemployment. As we see interest rate hike reversing, the money will start flowing to equities and particularly high growth markets including India.” Foreign institutional investors sold shares worth over Rs 37,630 crore in FY2023.

“Other factors to look for would be the geopolitical developments, upcoming elections in key states and recession in the developed economies which will impact the markets,” Sharma said.

Corporate Earnings Growth: Corporate earnings growth is a crucial factor that can affect the market sentiment and the performance of individual stocks.

Keeping an eye on these factors can help investors make informed decisions and adjust their investment strategies accordingly.

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