Nifty 50 vs GDP of India: The key benchmark indices of the Indian stock market surged to a new high after India’s Q3 GDP growth saw an impressive growth rate of 8.4% driven by robust manufacturing, highlighting the inherent strength and potential of our economy. However, the domestic equities got some support from the US Fed rate cut buzz as well after the easing of US inflation data that triggered profit booking in the currency market and the US dollar index came below the 104 level. According to stock market experts, Nifty 50 or Sensex or any other index of the Indian stock market grows two to two and a half times the GDP growth registered by the national economy. So, the robust GDP of India in the first three quarters of the current fiscal and a strong outlook in the fourth quarter are expected to power bulls’ sentiment in the medium to long term. They advised investors to maintain the buy-on-dips strategy on every big dip in the market. They went on to add that the high interest rate regime has peaked and now the market is waiting for an announcement of a timeline for interest rate cut. This announcement may begin from the upcoming US Fed meeting as the easing US dollar and US inflation have already triggered buzz for the US Fed rate cut. The central banks across the globe are expected to follow the shoot once the US Fed declares a timeline for the interest rate cut. They advised stock market investors to look at auto, banking, PSU, and debt-free company stocks to add in one’s portfolio as leaders of these segment stocks are expected to deliver whopping returns in the long-term.
1] GDP of India: “Indian stock market indices rise around two to two and a half times the GDP growth. As the GDP of India has grown over 8 percent in the first three quarters of the current fiscal, we can see that the Nifty 50 index grew from around 14,000 to the tune of 18,100 levels in the year 2023, logging a nearly 29 percent rise in this time. Such a whopping rally in the 50-stock index has happened because the market discounts strong GDP numbers ahead of its release. As the GDP of India is expected to deliver whopping growth in upcoming quarters as well, the market is expecting Nifty 50, Sensex, and other indices of the Indian stock market to continue giving whopping returns in the medium to long term as well,” said Sandeep Pandey, Founder of Basav Capital.
2] US Fed rate cut buzz: “Easing US inflation has triggered rate cut buzz in upcoming US Fed meeting. This buzz has triggered profit-booking in the currency and bond market, which is a good sign for the global equity market, which includes Dalal Street as well. So, FIIs are expected to pump money into the emerging markets where Brazil, China, and Indian markets have remained a traditional destination for the FIIs. As Brazil is facing political uncertainty and China has become a pandora box after the outbreak of COVID-19, the Indian stock market is expected to remain a favourable destination for the FIIs in the short to medium term,” said Avinash Gorakshkar, Head of Research at Profitmart Securities.
3] Easing US dollar rate: “As the higher interest rate regime has peaked out and US Fed may announce a timeline for the interest rate cut anytime in 2024, the US dollar index is expected to come down to its traditional 920 odd levels in the medium to long-term. It has already come down below the 104 level after touching around 111 levels last year. So, the GDP of India is expected to deliver stellar growth as easing the US dollar is expected to enable the Indian government to keep the rate of inflation under check. This would be a good development taking place in the national economy as the inflation has already remained under control when the developed economies were concerned about the high rate of inflation,” said Sandeep Pandey.
4] Strong outlook for global markets: “Investors are expected to shift money from the currency and treasuries to equities and other assets. So, liquidity in the global stock market is expected to go northward as weakness in the US dollar would continue to keep the bond market under pressure. So, the outlook for the global market looks positive in the medium to long term.. This is also expected to provide support to the Indian stock market,” said Avinash Gorakshkar.
5] Lok Sabha elections 2024 opinion polls: “As Lok Sabha elections are fast approaching, opinion polls have started to hit the headlines. Various opinion polls for the Lok Sabha elections 2024 are predicting victory for the BJP-led NDA government. So, a rally in the PSU, banking, and interest rate-sensitive segment is expected to pick up the momentum if the Lok Sabha elections results come in oline with the opinion polls’ outcome. BJP-led NDA winning the Lok Sabha elections would mean a continuation of the economic policies for the next five years, which is expected to boost the market sentiments further,” said Avinash Gorakshkar.
Asked about stocks to buy in the wake of the stock market rally as predicted above, Sandeep Pandey of Basav Capital said, “One can look at buying auto, banking, PSU and deb-free company’s stocks as they are expected to deliver strong returns during an uptrend. In the auto segment, one can look at buying shares of Mahindra & Mahindra (M&M), Maruti Suzuki India Limited (MSIL), Tata Motors, Bajaj Auto, and Hero MotoCorp. In the banking space, one can look at buying Union Bank of India and Canara Bank in the PSU space whereas HDFC Bank and ICICI Bank can be looked at in the private segment. In the PSU segment, Coal India shares can be a good pick even if it is trading at a 52-week high these days.”
Asked about the debt-free stocks to buy, former Deputy Vice President of HDFC Bank Sandeep Pandey said, “Most of the IT stocks are debt-free stocks, and quality IT stocks are expected to pick up in the wake of recovery in the US economy. So, buying TCS, and HCL Technologies can be a good move in current market scenario.”
Disclaimer: The views and recommendations above are those of individual analysts, experts, and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 02 Mar 2024, 01:43 PM IST
