'Stocks of new-age businesses could prove to be the dark horses in H2-FY24'


May 3, 23 | by: Jaspreet Singh Arora

How long will markets remain in the consolidation phase? Factors that could trigger a break-out.
Trying to guess the market direction in the near-term may be a futile exercise. What is more important is to understand that, in FY24, India is expected to grow at 6.5 per cent real and over 12 per cent nominal GDP, which is the highest amongst large economies in the world. Nifty EPS (earnings-per-share), on the other hand, can grow between 16-18 per cent in FY24 and select sectors in the range of 20-30 per cent. 
Factors that would trigger Nifty50 to break previous highs would be more clarity on recessionary fears, peaking of interest rates, continuation of strong quarterly print from India Inc, and benign US markets.
Midcaps are recouping their year-to-date losses. Do you expect the recovery to sustain?
Though the Nifty Midcap index has outperformed Nifty ovet the past 10- 20 years, it has not displayed a similar trend in the last five years. The sustainability of the recent recovery would hinge on the strength in the broad-based recovery of markets.
The Nifty IT index has shed over 3 per cent in a month. With IT majors posting lower-than-expected Q4 results, is it time to exit or should one buy the dip?
We expect short-term sentiment to remain negative due to banking concerns and weakness in the US markets. Moreover, a drop in hiring trends in FY23 from FY22, and further into FY24 would also add to the sector’s woes.
Valuation-wise, it has witnessed correction from early 2022 peak levels; however, it remains elevated compared to long-term averages. Therefore, we recommend investors to move from 'underweight' to 'neutral' position after one or two quarters, and then add related-stocks with a one-to-two-year time horizon.

Which sectors look promising for FY24? 
We like the consumer discretionary theme for FY24. Besides this, banking and financial services, building materials, and public sector units (PSUs). Other themes like tourism, hotels, and restaurants will also do well amid the G-20 summit, and ICC World Cup. 
On emerging themes, we believe new-age platform businesses could turn out to be the dark horse towards the second half of FY24 (H2-FY24). After a steep correction from their issue prices, we see that their fundamentals have improved on a sequential basis.

What is your investment formula for 2023? 
We advise a multi-cap well diversified portfolio with beta below 1x. Though 2023 may be a bumpy ride, we expect the end to be a prosperous one, provided investors invest with a time horizon of 2-3 years.
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