Strong macros, rate hopes, retail surge to keep up market rally, predicts Motilal Oswal

The bull run on Dalal Street is far from over, predicts Motilal Oswal Securities, as global liquidity tightening nears its end, domestic macro and micro environment looks robust, domestic and retail participation stays strong, and hopes of continuity in government policies after the elections run high.

Leading major economies in terms of growth, India shows promising potential for further rally in the market, despite fair valuations. Motilal Oswal anticipates sustained market optimism, maintaining a positive outlook and an overweight stance on sectors like BFSI, industrials, real estate, auto, and consumer discretionary.

High interest rates, banking crisis in the US and Europe, and geopolitical uncertainties had plagued the year 2023. The new year is expected to ease some of these concerns, particularly regarding interest rates, said the brokerage house.

“While multi-year high interest rates, geopolitical tensions, volatility in crude oil prices, slowing growth, and recessionary environment in developed markets remained the key concerns during the year, India’s strong economic growth, healthy corporate earnings, moderate inflation, waning crude oil prices, reinforced FII and DII inflows, and strong retail participation propelled the Indian markets to greater heights,” it said.

Among largecaps, Motilal Oswal likes Coal India, ITC, SBI, L&T, HCL Tech, Titan, Ultratech Cement and M&M. In midcaps, the brokerage house is bullish on Ashok Leyland, Godrej Properties, Angel One, Metro Brand, Global Health, PNB Housing, Kirloskar Oil Engine, and Lemon Tree.

After the sharp rebound, the Nifty now trades at a 12- month forward P/E of 19.6x, near its LPA of 20.2x (3 percent discount); however, it is at 15 percent discount to the September 2021 high. Further, the market capitalisation-to-GDP ratio is at 124 percent (Motilal expects nominal GDP to increase 8.2 percent/10.1 percent on-year in FY24/FY25), Motilal report said.

India continues as the fastest-growing among the top 10 global economies, showcasing resilience post-pandemic. Its robust recovery, amid global challenges, underscores the economy’s inherent strength. Factors such as strong growth, smart policy reforms, infrastructure emphasis, healthy corporate finances, ample forex reserves, and controlled commodity costs can shield India from external shocks and potentially lead it to surpass other nations in the next decade, it added.

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