Indian equities are likely to be muted for the rest of 2024, after having gained around 12% so far this year, amid stretched valuations, Nomura said on Thursday. The brokerage firm has retained its year-end target of 24,860 points for the Nifty that it set after the results of the Lok Sabha elections in June.
The Nifty on Thursday declined a marginal 0.03% to end at 24,315.95 points.
“The intensity with which the market rallied (post June 4) has been much stronger than what we thought,” said Saion Mukherjee, head of equity research – India at Nomura. “The question is has anything changed for us to change our view.”
The sharp rally over the last one month despite the unexpected coalition government coming to power at the Centre has surprised many market experts.
Mukherjee said though there are opportunities in the power and capital goods sectors, one needs to be selective. Execution of various schemes and policies, particularly targeting manufacturing, will be a key trend to look at going ahead, he added.
He also highlighted that pick-up of the private capex is one of the major factors for the market going ahead. “The medium-term growth in corporate earnings looks to be very dependent on that (private capex). If that doesn’t play out as expected, there could be questions about the long-term earnings growth.”
Within the overall market, Nomura said large-caps are currently more reasonable from the valuation perspective compared to mid- and small-caps.
Among sectors, the brokerage sees opportunities in capital goods and power, but said one needs to be selective in this space given stretched valuations. “One needs to be selective. Look at companies which have some technical expertise or some sort of differentiation, which can give them good pricing power.”
It has recommended caution when it comes to the automobile and consumer discretionary sectors because of slowing growth and disruptions following adoption of new technologies and a growing digital market.