Please find below the 5 charts that explains the Indian Equity Market Outlook for 2024.

 

1) US Fed expected to cut Interests Rate in 2024:

 

US CPI Inflation has recently fallen to 3.1% from the peak of 9.1% in July 2022.

 

To avoid recession, US Fed is expected to go for rate cut in 2024. 

 

US is expected to cut the rate from 5.4% in 2023 to 4% in 2024 and further bring it down to 3.25% by the end of 2025.

 

This augurs very well for Global and Indian Equity. 

 

Since 2008, the US Fed rate cut has pumped up the global equity market. 

2) Huge War Chest of Liquidity:

 

Due to high interest rates in US, the Money Market Funds (Short Term Debt Funds) in US have gone up by $1.2 Trillion in 2023 and have hit an all time high of $5.9 Trillion.

 

Huge war chest of liquidity is available to flood the the global equity markets when US Fed hopefully cuts the interest rate next year.

3) Emerging Markets expected to see huge FII flows:

 

Emerging Market stocks are at 50 year lows relative to US stocks.

 

It seems pretty clear that a lot more value is in Emerging Markets then in US.

 

With US Fed expected to cut the rates next year, Emerging Markets & India are expected to see huge FII flows and are expected to deliver good return to investors. 

4) Is Indian Equity Market Overvalued?:

 

Depends on which segment of market you are looking at.

 

Large Cap is trading at the long term average and is fairly valued.

 

Mid Cap is overvalued by 12% and Small Cap is overvalued by 26%.

 

2024 is going to be the year of Large Caps.

 

In short term, Large Caps are expected to do well but in long term, Mid Cap and Small Cap are expected to perform better. 

5) How deep can Indian Stock Market correct?

 

Not much because of huge liquidity available with Domestic Institutional Investors.

 

Approx Rs. 4 Lacs Crore available with DII in a year and approx Rs. 1.75 Lacs Crore available in a month for equity buying.

 

Assuming that there will be no outlier event like War, Covid etc, we don't expect a short term dip of more than 10%-15% in 2024.

 

 

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.

 

Read more similar articles in our blog - https://alphacapital.in/blog/

 

Best Regards

 

Dr. Mukesh Jindal CFA, CFP, CAIA, Ph.D.

Alpha Research