There is little doubt that Indian stocks, as represented by the Nifty Index, will hit record highs sometime early in April ahead of fourth quarter earnings and before the world’s largest democracy heads of national elections, analysts say, adding the longer-term prognosis favours aggressive bulls.
``The main equation globally and locally is changing,” says Deven Choksey, Founder of wealth management firm D R Choksey Finserv. ``Interest rates have peaked out and that will prompt a lot of foreign money to come back to Indian shores. These will make Indian equities to dance to higher levels.” Fresh peaks of 22,750-23,000 on the Nifty have opened up, analysts say.They add, a fresh burst of monthly liquidity via surging systematic investment plans in mutual funds, ultra bullish high net worth individuals and, for a change, positive monthly foreign inflows for March have negated huge stake sales by several promoters – both foreign and domestic, pointing to resilience of Indian equities.
Consequently, domestic markets absorbed about 50,000 crore rupees of promoter equity in the form of partial stake sales by companies such as ITC Ltd, Whirlpool Ltd and Mahindra & Mahindra Ltd during March.
Reasons for these huge stake sales ranged from funding foreign parent buybacks in the case of ITC and buoyant Indian valuations just to name a few.
All of them and more were absorbed by eager domestic investors, who perhaps know more about local companies’ growth prospects compared with their overseas owners!
Traditionally, April has been a trending month for Indian equities if previous 22 years’ worth of monthly data is to be believed. On average, the Nifty rose 2.1 percent during April and only in nine out of the 22 years did the 50-share index fall.
WHAT’S NEXT?
Fourth quarter performance for sure in a market that was buffeted by extreme volatility during March, mainly due to tax considerations and huge stake sales! Analysts are looking forward to January-March earnings from corporate India amid signs of strong balance sheets and capex build ups – both brownfield and greenfield.
Mumbai-based Choksey hopes for earnings outperformance from auto majors such as Maruti, Bajaj Auto, Tata Motors and Mahindra & Mahindra as aspirational spending on newer vehicles grows in the upper middle classes. He is hopeful that mid-tier software companies focussing on global aviation and automobile sectors may show sustained earnings growth for 2-3 years.Choksey names L&T Technologies, Tata Elxsi, Cyient and KPIT Technologies as stocks in the software engineering and R&D space that attract his attention for the medium term.
His contra bets include leading specialty chemical sectors and Choksey says accumulating State Bank of India, HDFC Bank and JiO Financials during 2024-25 as a sensible strategy given the size of their balance sheets.
"For micro-cap and small-cap, one needs to be careful as the risk is higher at current levels. As of now, we don't like the consumption-theme such as durables and paints. Also, we stand 'overweight' on banks and lenders," said Devina Mehra, Chairperson, Managing Director and Founder at First Global.
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