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Samvat 2080 saw Indian equities soaring to new highs with Nifty-50 surpassing the milestone of 26k to make a new high of 26,277 in Sep’24. Despite recent correction of 7% from the top, Nifty has given a return of 26% in Samvat 2080 so far (14th Nov 2023 to 24th Oct 2024). Broader markets have significantly outperformed with Nifty Midcap 100/ Smallcap 100 rallying 38%/37%. This remarkable journey can be attributed to healthy corporate earnings, political continuity, surge in domestic flows and resilient macro landscape that has weathered global storms. Moderation in inflation and expectation of peaking-out of global interest rates in the last few months too supported equities.

Key events in Samvat 2081:

•        US Presidential election in Nov’24; State elections in Maharashtra & Haryana in Nov-Dec’24 followed by Delhi in Feb’25.

•        Start of Domestic Rate Cut Cycle.

•        Earnings growth trajectory

Outlook:

Corporate earnings, after four consecutive years of healthy double-digit growth, are moderating due to pressures from commodities and fading tailwinds from BFSI asset quality improvements. Despite the challenges, the ongoing festive season, better-than-expected monsoon, and consequent pick-up in rural consumption provide a near-term catalyst. Major global central banks including US Fed have pivoted towards monetary easing cycle. This shift implies a favorable environment for risk assets. Consequently, markets appear to be experiencing a genuine tug-of-war between the headwinds and tailwinds.

Nifty is currently trading at 12-month forward P/E of 21.5x, which is just 5% above its last 10-year average of 20.4x. The valuation is indicative of the optimism regarding the long-term growth. India is one of the fastest growing economy with GDP growth of 8.2% in FY24 followed by 6.4% in Q1FY25, while other macro factors also suggest a strong outlook. Nifty earnings growth is likely to remain steady at ~12% CAGR over FY24-26. For Samvat 2081, we expect sectors linked to domestic structural and cyclical themes to do well. We are positive on sectors such as Financials, Consumption, Industrials, Technology, and Healthcare.

Our last year’s Diwali picks have done well, with some of our ideas, such as Kaynes  (+133%), M&M (+112%), Indian Hotel (+81%), SBI (+40%), Cipla (+31%) generating superior returns compared to Nifty’s gain of 9%. We present below our key themes and ideas for Samvat 2081.

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