'Exceptional': Nifty likely to end at 21,834 in 2024, says Kotak Securities

The brokerage said several factors in the next few months would set the tone for the global and Indian markets in the first half of next year

Kotak Securities has set a base case target of 21,834 for the National Stock Exchange Nifty50 for the coming year. The brokerage highlighted the exceptional rally this year, considering various headwinds and widespread investor participation.

In 2023, markets faced challenges such as the Russia-Ukraine war, the Israel-Hamas conflict, peak global inflation, rising crude prices, peak US 10-year yield, and consumption slowdown.

Despite these factors, the Nifty has gained 18.3 per cent, the Nifty Midcap 100 by 45 per cent, and the Nifty Smallcap 100 by 54 per cent this year.

The Kotak Securities note mentioned that although foreign portfolio investors (FPIs) expressed confidence in the Indian capital market by injecting ~1.14 trillion into equities year-to-date (YTD), the retail category, through systematic investment plans (SIPs), invested ~1.07 trillion in the first seven months of this financial year (2023-24).

Jaideep Hansraj, chief executive officer of Kotak Securities, remarked, “I don’t think we, or any other part of the world, are in the sweetest spot, as we are currently experiencing many global events, specifically towards India.”

The brokerage identified several factors in the next few months that would shape the global and Indian markets in the first half of next year. These include the duration and magnitude of peak interest rates in the US and other developed economies, a likely revival in India, potential disruptions in certain consumption sectors like automotive and paint, and the upcoming general elections in mid-2024.

The brokerage expressed a preference for mega-caps due to their reasonable valuations and greater immunity in the event of any negative developments in the next few months.

“Megacaps are in a bear market, with many largecap stocks delivering modest positive or moderate negative returns in the past two to three years. The large and high-quality midcaps are in a bull market. The report stated that the weak operating performance in the short term and likely deterioration in fundamentals in the medium term are largely ignored by the market,” the report said.

The report further observed that low-quality midcaps and smallcaps are in a bubble market, with the market attaching unrealistic narratives to many stocks.

When asked about a conservative Nifty target, Shrikant Chauhan, head of research at Kotak Securities, commented, “A lot of tailwinds have been priced in at the moment. If good things are priced in, it’s a matter of concern. Right now, many things are priced in. We have to see what new triggers are going to come for Indian and global markets, and based on that, we can adjust our targets. Currently, we believe that markets are going to consolidate.”

“There are multiple asset classes available now compared to 2008. That’s why we are targeting Nifty levels based on 18 times 2025-26 earnings per share. If we see more expansion, if FPI buying comes, or if we see global or Indian macroeconomic support, we will see Nifty higher,” Chauhan added.

Kotak Securities anticipates a bull case scenario with Nifty ending at 24,260 and a bear case scenario of 19,408 by the end of 2024.

Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd