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Broader market index Sensex is trading at around 5 percent valuation premium based on intrinsic value. However, mid-cap stocks are commanding a reasonable valuation premium over their historical averages while there is a froth in the small and micro-cap segment, reports Client Associates (CA) Annual Equity Assessment 2024.
While large-cap private banks, NBFCs, and IT are looking relatively attractive in terms of valuations, Industrial, PSUs, consumer, and capital goods are expensive as compared to their medium-term averages, the report further adds.
The Indian equity market is in a goldilocks situation with steady GD growth, moderate inflation, favourable policies and strong earnings growth.
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However, investors should moderate their return expectations due to moderately expensive valuations. It is likely to be a volatile year mainly on account of an expected slowdown in global activities and frothy valuations of small & micro-cap stocks.
Resilient year
The report said that the Calendar Year 2023 will be remembered as a year of economic resilience in the aftermath of rising interest rates and restrictive monetary policy.
Almost all economists at the beginning of 2023 predicted a mild or severe recession in US. However, strong private consumption due to accumulated covid savings and expansionary fiscal policy enabled the US to deliver better-than-expected GDP growth during the year.
Global Economic Cycle
Global economic activities in 2024 are expected to remain well below the long-term averages due to the lag effect of high interest rates and tight credit market conditions. Global central banks are expected to turn dovish during the year as inflationary pressure is witnessing a sustained moderation.
Divergent economic growth will persist in 2024 as well with emerging economies expected to perform better than advanced economies.
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As per broader estimates, global growth is expected to slow down to 2.60 per cent in 2024 as compared to a long-term average of 3.0%. While US is expected to grow at 1.30 per cent in 2024, growth in the Euro Area will increase by 0.50 per cent.
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: 15 Feb 2024, 05:01 PM IST
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