Stocks from the banking, consumer discretionary, and rural-oriented sectors are expected to perform well in 2024, believes Sushant Bhansali, CEO of Ambit Asset Management.
In an interview to Moneycontrol, Bhansali says strong credit growth, stable asset quality, increasing per capita income, and rural recovery will be the key driving factors for these sectors. He feels chemicals and IT sectors may emerge as potential dark horses in 2024.
"We anticipate no significant downgrades in earnings for Q3FY24. Our ground checks indicate reasonable demand during the festive season," says the chief executive with more than 19 years of experience in asset management and equity markets. Excerpts from the interview:
What's your take on the year passing by (2023) for the secondary and primary markets?
The buoyancy in markets has extended following the recent state election outcomes, bolstered by increased certainty of political stability in the country. Primary markets have displayed robustness with more than $11 billion raised year-to-date (CYTD) from IPOs, rights issues, OFS, and QIPs.
Substantial investments, notably in the mid and small-cap categories/funds, have propelled the primary markets to their best performance in recent years. However, our assessment suggests that this heightened momentum in funding may temper in the near term due to both global and domestic factors.
Also read: Stockology: Will markets see trend-reversal in last trading week of the year?
Do you think the market has priced in most of the positive news, including more interest rate cuts than Fed hinted?
The Indian equity markets underwent consolidation between September 2021 and May 2023. The commencement of CY23 saw many economists and experts predicting a recession in the USA and other developed economies. However, current inflation and employment data indicate a favourable trend, leading markets to factor in interest rate cuts ranging from 75 to 100 basis points for CY24.
US bond yields are currently well below 4 percent, significantly lower than the 5 percent observed in October 2023. Anticipation remains high for potential market upside once this event unfolds, expected to commence in the next quarter.
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Factors to watch out for in the coming year...
The economic growth of developed markets, geopolitical tensions like those between China and Taiwan, the resurgence of Covid, and core fundamental shifts are key factors to watch for next year. Additionally, significant events such as the general elections in India and the USA will also command attention.
Three sectors/themes that will emerge as great bets for 2024...
The banking, consumer discretionary, and rural-oriented sectors are expected to perform well in the upcoming year. Strong credit growth, stable asset quality, increasing per capita income, and rural recovery will be the key driving factors for these sectors. Additionally, chemicals and IT sectors might also emerge as potential dark horses in 2024.
Also read: New India: Why this asset class demands a premium multiple?
Do you expect a significant jump in upgrades over downgrades in terms of earnings in Q3FY24 results season starting next month?
We anticipate no significant downgrades in earnings for Q3FY24. Our ground checks indicate reasonable demand during the festive season. Although there are certain areas experiencing softer demand, the majority have witnessed growth ranging from mid-teens to high teens.
Robust demand is notable in areas such as credit growth, loans, automobiles, two-wheelers, and discretionary expenditure.
What do you expect from the Union Budget 2024?
Union Budget 2024 will be vote-on count and, thereby, would not impose reforms in our assessment. Some reliefs in direct tax, consumption boost to weak pockets of the economy apart from thrust on government capital expenditure should continue in this budget.
Do you expect 2024 to be a great year for IT and PSU banks?
The IT sector experienced significant order wins in CY2023, despite weak execution resulting from budget postponements by global corporations. As clarity on interest rates emerges, spending is expected to take center stage, leading to a revival in earnings growth for Indian IT companies and the sector as a whole.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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