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Market returns this year may be in line with the earnings growth, which is expected to come in at 13-15 per cent, Aditya Birla Sun Life AMC said in its equity outlook for the ongoing year.
“In 2023, risk was rewarded disproportionately, and we saw a strong rally in equity markets. Markets may consolidate in the near term, and returns in CY24 are likely to moderate. While large-cap valuations are still at just Rs 5 per cent premium to the long-term average, mid-and-small-cap valuations are elevated," it noted.
The economic growth, the AMC said, is expected to be led by investments, given the government’s capex push and revival in the housing sector. Consumption, which has been weak so far, should also improve from current low levels on the back of a general economic uptick, election-related spending, and lower inflation.
On the fixed income side, the fund house noted that the Reserve Bank of India (RBI) may not resort to rate cuts in calendar 2024 and rather look to ease liquidity to support growth.
Pegging the fixed income return expectation at 8-9 per cent in 2024, the AMC said this may be the right time to increase allocation in fixed income from a tactical point of view. On Gold, the AMC's view is that while the decline in real yields, Dollar depreciation, and continuing geopolitical risks should be supportive for the yellow metal, the upside could be limited as these factors have largely been priced in.
