Jefferies Bullish on Indian Stock Markets, Cites 4 Key Reasons for Potential New Highs in 2024

In a recent report, Jefferies India Pvt Ltd has outlined four compelling reasons why the Indian stock markets could witness new highs in 2024, following an impressive 20% rise in the Nifty at the close of 2023.

Jefferies emphasizes that the relative valuations in the market are currently favorable. While the Nifty is trading at 20 times 1-year forward earnings estimates, the premium of 67% over emerging markets (excluding China) is only slightly higher than the historical average. The Indian market also appears reasonable on a price-to-earnings growth basis. Jefferies sets a Nifty target of 24,000 for December 2024, suggesting a 12% total return, assuming the current multiple sustains, supported by a 12% compound annual growth rate (EPS CAGR) and robust flows.


Foreign inflows are expected to improve in 2024, according to Jefferies, driven by factors such as a peaking Dollar, the May 2024 general elections, and the growing significance of India in global markets. The report draws parallels with Chinese equities, which experienced over $50 billion in foreign inflows annually from 2017 to 2021, despite China’s larger market size. Jefferies notes that the global environment was not conducive for emerging market flows during that period.

Domestic institutional flows, particularly through Systematic Investment Plans (SIPs), have consistently supported the Indian markets. Jefferies anticipates no disruption to domestic flows, especially as fixed income becomes less attractive due to tax changes.

Jefferies identifies the ongoing multi-year capex cycle in India as another catalyst for potential market highs. Housing, corporate capex, and government capex are all contributing to the cycle, and the report suggests that the potential global slowdown should have a limited impact on India. Even a potential government capex slowdown is expected to be offset by a pickup in private capex.

The positive outlook extends to the domestic economy, capex, and specific stock picks by Jefferies, including large banks such as Axis Bank and ICICI Bank, developers like Lodha and Godrej Properties, power stocks including Coal India and JSW Energy, two-wheeler companies like TVS Motor and Eicher Motors, telecom giant Bharti Airtel, and capital goods firms such as Adani Ports and Kajaria Ceramics.

Jefferies views the banking sector as having the best risk-reward profile, benefitting from sector rotation and standing out with below-average multiples. The potential for earnings surprises exists if asset quality holds up, making it a favorable option for foreign flows from global mandates.

In summary, Jefferies maintains a bullish stance on the Indian stock markets, anticipating new highs in 2024, driven by favorable valuations, improved foreign inflows, sustained domestic flows, and the unfolding multi-year capex cycle. Their optimism extends to specific sectors and stock picks, signaling confidence in the Indian market’s growth potential.

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