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Client Associates (CA), India’s largest multi-family office, today released a report on “CA Annual Equity Assessment 2024”

In a dynamic landscape, CA's annual assessment positions the Indian equity market for a promising 2024. The intrinsic value of Sensex, predicted to be 77,400 by December 2024, serves as a pivotal reference point for market valuation. Alongside this, CA imparts strategic insights, advising a preference for Growth and GARP (Growth At a Reasonable Price) managers while strongly discouraging allocation to Value funds.

CA is Underweight on Mid & Small cap stocks. No allocation advised to Value funds.

Key Economic Highlights:

1. Indian Economy & Earnings -  Indian corporates expected to report 15% EPS growth in FY2025 driven by strong domestic consumption, policy reforms, and healthy corporate balance sheets. The economy is projected to grow at about 6.5% in FY25 mainly on account of strong domestic demand, calibrated policies, and the Govt.’s continued focus on capital expenditure.  It remains the only large economy that will witness a GDP growth higher than its long-term averages, and an inflation rate lower than its long-term averages in CY2024 and FY2025.
2. We believe that inflation and interest rates have peaked out in India. In line with the expected moderation in the inflation rate, RBI is expected to cut rates in the second half of CY2024.
3. Global Economy: Global economic activities likely to remain subdued due to high interest rates and tight credit conditions. Global central banks expected to turn dovish as inflationary pressures moderate. Divergent economic growth expected with emerging economies performing better than advanced economies.
4. Equity Market Dynamics: The CAE3 grid reinforces the positive economic outlook, expecting strong economic activities, a stable macro profile, and favorable policies. India is poised to outperform its long-term averages in both GDP growth and inflation.

Sectoral Insights:

• Sectoral Recommendations: While large-cap Private Banks, NBFCs, and IT are looking relatively attractive in terms of valuations, Industrial, PSUs, Consumer, and Capital goods are expensive as compared to their medium-term averages. 
• Infrastructure and Auto:Auto sector is set to report an upbeat earnings growth in the current fiscal backed by strong auto sales amid higher discretionary spend. Infrastructure companies due to all-time high order book and stable volumes are set to deliver a better-than-average earnings growth during the year

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• FMCG and Power:FMCG companies expect steady profit growth, while power and energy companies outline plans for capacity expansion and diversified earnings.
• Steel and Cemen The steel sector anticipates abnormally high growth in FY2025, benefiting from a low base in previous years. Cement, despite facing challenges, is supported by stable volume growth.
• Telecom and Engineering: Telecom companies like Bharti Airtel and engineering giants like Larsen & Toubro showcase positive earnings outlooks, driven by tariff hikes and order book strength.

Client Associate's Asset Allocation & Manager Selection Advice:

• Asset Allocation Stance: Recommending a Neutral stance on Indian Equity Markets, the CA advises investors to realign their equity exposure to policy allocation, given recent substantial gains.
• Category Allocation: Urging caution, the CA recommends being Underweight on Mid & Small cap stocks, recognizing signs of froth in these segments.
• Manager Selection: Expressing a preference for Growth and GARP managers, the CA strongly discourages allocation to Value funds.

Client Associates says,"In 2024, Indian equity markets offer an optimistic outlook. Our advice to investors is to navigate carefully, leveraging positive economic indicators while staying mindful of potential volatility. The identified sectors present potential opportunities for strategic investments in line with the overall positive market sentiment."Expanding on the assessment, he added, "As India stands out among emerging markets, the CA Annual Equity Assessment 2024 signals a positive trajectory. The intrinsic value prediction for Sensex and the growth-oriented approach provide a robust foundation for investors navigating the promising yet dynamic equity market landscape."Top of Form