“The market is trading at around 21.6 times on FY24 expected earnings and 19.1 times on a
forward basis. This is in line with the historical averages and therefore doesn't indicate a bubble
formation," Manish Goel, Founder & Director, of Research & Ranking. In an interview with ETMarkets, Goel said: “Realty and Capital Goods sectors have been performing really well over the past year. This is fuelled by pent-up demand and revival in B2B activities following the lull caused by Covid,”

Edited excerpts:
December started on a robust note with benchmark indices hitting fresh record highs. Where is the market headed in 2024? December certainly had a great start for the stock market. Now, as we think
about what might happen in 2024, a few important things could affect how the market behaves.

Firstly, even though the recently concluded state elections have reduced uncertainty about the upcoming general election but pre-election jitters can be anticipated.

Additionally, there is a growing expectation that interest rates might decrease, presenting a very positive signal to investors. However, the timing and extent of the reduction will impact market movements. Having said that, Indian corporates are expected to sustain strong financial performance. Earnings growth has continued in the second quarter of the fiscal year 2024.
And thanks to the reduction of debt on their balance sheets, they are in a good position to invest more in their businesses. Overall, barring some volatility in the markets due to the aforementioned
factors, the outlook for 2024 and beyond looks favourable.

What will drive the next leg ofthe rally – FOMO, TINA, policies from govt or earnings?

In the short term, a mix of all the factors mentioned will probably influence the stock market. But finally, it all boils down to the fundamentals. Therefore, regardless of the reasons for short-term market movements, I would advise investors to stay focused on the earnings growth potential of the
businesses they select. Small & midcaps turned outto be real winners in 2023 (index up over 35%
each), how should one play this space in 2024? Yes, you are right, small and mid-cap indices have exhibited remarkable performance in recent months. Over the 12 months ending on Dec 11, 2023,
NIFTY returns stood at 13.5%. In contrast, both the NIFTY Midcap and small-cap indices have delivered returns exceeding 35% during this same period.

Although there are still appealing investment options in this category, we suggest that investors exercise caution due to the current valuations. It's advisable to opt for a bottom-up investment approach rather than blindly investing into the theme.

The next big trigger for markets will be the Interim Budget 2024. What are your expectations?

In line with the usual approach during an election year, we don't foresee
major announcements in this budget. As the name implies, it's an interim budget, designed to bridge the gap until the new government takes charge. The more comprehensive policy and expenditure decisions are expected to be part of the full budget for the financial year 2024-25, which will be presented after the new government takes charge post the general elections. Infact, Finance Minister Smt Nirmala Sitharaman has already clarified that the upcoming Vote on Account will not include any substantial announcements.

Realty and Capital Goods sectors witnessed a jump of over 60% in the last 1 year – does it make sense to allocate money to these sectors next year?


Realty and Capital Goods sectors have been performing well over the past year. This is fuelled by pent-up demand and revival in B2B activities following the lull caused by COVID-19. We think that the demand for both these sectors will stay strong. That means companies in these sectors will continue to do well in the foreseeable future. While some companies in these sectors might seem a bit expensive when you consider their value compared to their potential for growth, we still believe
that there are some good opportunities available for investment. To find these opportunities, it's important to look at each company's specific situation rather than just the overall sector trends.

In the event of a rising tide – how should one look at stocks that are hitting 52-week highs? Should one look for contra buy or hold on to stocks that are hitting fresh highs?


In our view, the key principle in investing is to buy at a price below the intrinsic value of the asset. Whether a stock is at a 52-week high is secondary in our perspective. The primary focus should always be on identifying value in any market condition. For short to medium-term investors with a 2–3-year horizon, relative undervaluation could be a crucial factor to consider. On the other hand, long-term investors may prioritize assessing the intrinsic value of the stock. Ultimately, the decision on whether to buy, hold, or sell should be guided by the investor's horizon of investment and risk appetite rather than solely reacting to whether a stock is hitting new highs.
Each investor's strategy may vary based on their individual goals and preferences. It's essential to adopt an approach that aligns with your own investment philosophy and objectives rather than being overly influenced by short-term market movements.

Things which one must avoid doing when trading at record highs? What should investors avoid doing?

First, do not take hasty decisions because impulsive investing carries risk. Second, avoid chasing prices. Always adherent to the concept of "margin of safety." This means making sure that the price you pay for an investment is lower than its actual value. This will protect your investments from the unexpected ups and downs in the market.

I read somewhere that the way Indian markets are booming it will soon turn into a bubble – do you agree?


Just because the Indian markets are reaching new highs doesn't necessarily mean it's a bubble. There are some good reasons behind the impressive market performance. Companies are doing well, and their profits are growing. The overall economic situation in the country is looking good. Even recent state election results suggest that the political environment is stable, which is great for the markets. The market is trading at around 21.6 times on FY24 expected earnings and 19.1 times on a forward basis. This is in line with the historical averages and therefore doesn't indicate a bubble formation. So, despite the high levels, things seem to be on a solid foundation rather than being in a bubble situation.

What about China? How will the slowdown impact India/sectors of India Inc.?

As China experiences economic challenges, India’s relative stability becomes more attractive to global investors. China is not only the world’s largest manufacturing economy, but it is also the largest consumer of many commodities. In both aspects, India stands to gain when the Chinese economy starts to stutter. To capitalize on the growing concerns to diversify the global supply
chain from China, India has already initiated steps like PLI, Atmanirbhar Bharat, etc., and has started reaping the benefits of it as well. Furthermore, India being a large importer of commodities, any slowdown in Chinese demand can translate into lower import bills as well as better profitability for the domestic players. Agreed this transition would not be very smooth considering the impact on goods and services exported to China as well as the likely ill effects the Chinese slowdown can have on the currency markets. However, let us not forget that as India pursues its dream of a $5 trillion economy, the potential for investors is evident. The government’s strategic initiatives, coupled with favorable demographics and global economic dynamics, position India as an attractive investment destination. FDI flows are also reflecting this shift. While quantum remains favorable towards China, there is a reduction in FDI flows to China in recent
years, whereas India is reporting record-high FDI flows.

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