Stock market outlook 2024: Anil Rego suggests adding stocks from these sectors next year

At a time when the benchmark equity indices are hovering at their record high levels, Anil Rego, Founder and CEO of Right Horizons, believes that the markets are at reasonable valuations from the perspective of FY25 earnings and the rate cuts will benefit the markets disproportionately in terms of market capitalisation.

On a year-to-date basis, the BSE Sensex has gained over 17 per cent so far to 71,315.09 on December 18 against 60,840.74 on December 30 last year. The NSE Nifty index also advanced 18 per cent during the same period.

The market watcher thinks that rate cuts globally will lead to inflows from foreign institutional investors (FIIs) going ahead and sectors like information technology (IT), consumer, automobiles, manufacturing and real estate to be primary beneficiaries, alongside financials.

“Though our inclination is towards the mid and small-caps, we expect the large-caps to also contribute going forward as multiples expand for the market against the backdrop assuming a stable global macro, domestic political continuation, gradual rate cuts by the RBI that will lead to expansion in valuation as the discount rate is lowered and increased inflows from FIIs,” Rego said.

Broader indices the BSE MidCap and BSE SmallCap indices have rallied over 40 per cent each YTD.

He further added that the domestic economy is at a long-term secular megatrend where the relationship with historical trend is being muddled with distinct secular drivers creating inflection that is of greater prominence for the current investment landscape.

However, he believes that the risks to the macro are skewed towards the global slowdown and geo-political mayhem that seed intermittent periods of volatility in the equities market.

Asked which factors are keeping him bullish on the domestic stock market, Rego says optimism lies in the narrative that India is advancing globally, positioning itself as the fastest-growing major economy. GDP growth during the first half of FY24 has been robust, exceeding expectations. Earnings in H1FY24 have been healthy additionally they have observed the proportion of profits in the GDP has experienced an upward trajectory, ascending to nearly 5 per cent at present, and projected to go further up over the next three years.

“We anticipate robust annual earnings growth over the next three years, driven by multi-decadal growth outlook for the economy, healthier corporate balance sheets, expanding capex trend focused around infrastructure, a multiyear credit cycle for financials, a structural increasing trend in discretionary consumption and a dependable reservoir of domestic capital,” Rego said.

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