Following is the Alpha Capital Outlook for January 2024:

1) The Year 2023 was a great year for Equities. Nifty, Mid Cap, Small Cap and Nasdaq went up by 20%, 47%, 56% and 55% respectively.

2) Domestic Institutional Investors (DII) invested USD 22 Billion and Foreign Institutional Investors (FII) invested USD 21 Billion in Indian Markets during the year 2023.

3) Corporate Earnings are strong and have been supporting the markets. Earnings for Nifty has grown by 16% CAGR over FY19-24E.

4) According to us, Indian Equity is now overvalued by ~20%. The PE Ratio of the Nifty 500 is at 24.5.

5) Mid Caps, Small Caps and Micro Caps are relatively more expensive due to big rally in 2023.

6) In near term, we expect Large Caps to do well but from a long term perspective, Mid Small and Small Cap looks good.  

7) Currently, Nifty 500 is at the 19429 level. Equity buying to be done at 15,000 level and profit booking to be done at 21,000 level. We have been increasing the profit booking level because of the positive data on economy and markets.

8) Important Question - Whether the current cycle is similar to bull run of 2003-2007 or we will see the downcycles like 2008 & 2020?

9) We believe that we are in the early cycle of the bull run and in the coming years we may see a big rally because of the following reasons:

a) US Fed is expected to start cutting the interest rates in 1st half of the 2024 due to falling inflation and expected global slowdown. The rate cut will lead to huge FII flows to Indian and other Emerging Markets.
 

b) Higher tax on debt funds from 1st April 2023, is making Indian investors invest more in equities. As of now, TINA (There Is No Alternative) factor is very strong.

c) Indian stock market is seeing a structural inflow of approx. Rs. 25,000 Crores every month from Mutual Fund SIP, EPF, NPS and Insurance. This is expected to become bigger in coming years.

10) However, the journey of bull run is not expected to be smooth especially when valuations are high. We may see short term volatility and drawdowns as well. We need to be emotionally and mentally prepared for same.
 
Disclaimer – The above views are our expectations of the economy, market and investments. The views may or may not play out accordingly. You are requested to do your own due diligence before making any investment.

Wishing you a very Happy 2024!!

Best Regards
 
Alpha Research Team