In charts: Why ICICI Direct sees Nifty hitting 25000 in 2024

Indian Equities are expected to compound at 12-15% as seen historically

 Indian equities were an outperformer compared to most global peers in calendar year 2023, more in mid and large-cap space despite geopolitical tensions, rise in key policy rates across the globe and volatile commodity prices. Brokerage ICICI Direct has pegged the December 2024 target for Nifty at 25,000 and the Sensex target at 83,250; offering a potential upside of 15 per cent from current index levels.

 

"As we embark on CY24, there are green shoots in the form of continued corporate earnings momentum domestically, healthy GDP growth, benign commodity prices outlook as well as likely rate cut globally. Thus, there seem to be more positive than negatives ahead. Amidst this setup, India is in a sweet spot vis-à-vis global peers with macroeconomic stability and corporate earnings in sight. Corporate earnings recovery has been healthy in the recent past with Nifty earnings growing at 22% CAGR over FY20-23. Going forward, introducing FY26E, we expect Nifty earnings to grow at a CAGR of 16.3% over FY23-26E," said Pankaj Pandey, Head-Research, ICICIDirect.

 

ICICI Direct's stock picks for 2024 include UGRO Capital, SBI Cards, NMDC, Uno Minda, Greenply Industries, Birla Corporation, Grindwell Norton

Resumption of FPI flows to propel markets further

Indian Indices made fresh life highs and retained its best-performing market helped by the resumption of foreign flows. The net flow for the current calendar year is nearly $17 billion while the rest of the emerging markets have seen nominal flows, noted the report.  In the post-Covid era, while most of the markets are still reeling below their 2021 highs, Indian indices have given significantly higher returns than the rest.

"India’s share in the Emerging market index has almost doubled from 7% to 14% in the last eight years and is likely to increase further with higher economic size," said Pandey. 

The report further said that JP Morgan’s Bond index inclusion could alone lead to FPI inflows of $25 billion or Rs 2 trillion  in Indian debt market.

"Apart from JP Morgan GBI-EM-GD index, Bloomberg Global Aggregate Index(Global Agg) is also likely to include Indian bonds in its index. It has an estimated AUM of $2.5 trillion and with 0.6%-0.8% weight, additional potential inflows could $15-20 billion.  Such inflows coinciding with the global rate-cut cycle are likely to push bond yields lower resulting in lower cost of funds for Indian corporates.

Some of the themes for CY24 are

Capex Cycle – combination of Core Sectors, green growth and PLI

Cement – Healthy utilisations likely amid expanding capacity

Steel – the capacity to double amid green focus

Auto Sales - premiumization trend getting stronger

Banks – back on strong footing

Real Estate experiencing a decadal revival

The key risks for CY24 that may manifest include global growth slowdown, escalated Geopolitical tensions (if any) and any negative surprise from Covid erupting once again.

The year 2024 is likely to witness sharp slowdown in major economies like U.S. and China while growth in the Euro region is also likely to be sub-optimal. The same poses a risk to the otherwise resilient domestic economy especially on the exports front.