Stocks as Investment Option for 2024: Chandrasekaran M

NEVER Invest in stocks in 2024: If you hear this from your friends, relatives and acquaintances, just label them as pessimists and IGNORE their advise.

Is it worth pumping in fresh money into Indian stocks in 2024?

This is a moot question in many investor’s mind, particularly those who missed the bus in 2023 when the Indian stock markets surged to a new peak – with the NSE barometer – Nifty recording an 18 per cent yearly gain. The rally gained further steams towards the year-end as outcome of the elections held in some states reflected faith in the ruling party at the centre.

India is performing better than most other emerging markets, even as Foreign Institutional Investors (FIIs) position remained fairly underweight. That said, fund flows from international markets are set to increase in the coming years. Indian stock market emerged as the 5^th largest in the global ranking, with the market capitalisation recording a growth of 15 per cent in the last five years.

Additionally, domestic mutual funds saw huge fund inflows from retail investors, particularly in the last couple of years.

Total collections by MFs moved up from INR 96,000 crore in FY 2020-2021 to a whopping INR 155,000 crores in FY 2022-23. This helped mitigate the impact of selling pressure from FIIs, during the second half of 2023. This was induced by multiple factors such as a strong US dollar, geopolitical tensions in the European region, inflation worries etc.

NSDL data showed a surge in new Demat accounts after COVID-19 outbreak. This prompted many professionals to work from home and to start focusing on a second income source.

2024: What To Expect

Approaching stock investing with a long term perspective should be the mantra at any given point of time, irrespective of whether it is a bull or bear market.

While the forthcoming general elections during the first half of 2024 might be a hangover, a disciplined investing strategy will certainly help small investors reap the fruits of stock investing.

The stock market generally doesn’t like uncertainties. Selling pressure, if any, ahead of the elections may be used as a buying opportunity.

Thumb rule –
No individual can perfectly time the market.
If you have a long-term perspective, never get carried away by any short-term jitters.

2024: Where To Focus

Zeroing in on the right sectors to put your money in is a key step in successful investing. As the global economies have so far averted a meaningful downturn and most major global central banks, including the U.S. Federal Reserve set to reverse the string of rate hikes implemented in the wake of rising inflationary pressure. Now the time might be ripe to consider risky bets such as stocks as an investment avenue.

Here are a few sectors recommended by analysts for 2024:

Infrastructure, Information Technology and finance are good picks for 2024.
Risk-Reward also appears to be favouring the Banking sector.
Themes such as logistics, manufacturing and energy transition could be better bets.
New-gen companies are expected to steal the limelight in 2024. Two wheeler companies, mainly those manufacturing electric vehicles (EV) should remain on investors’ radar in 2024.
Food delivery companies such as Zomato are worth adding in the watch list I.

While large-cap stocks continued to grab the attention, analysts don’t see a meaningful runway for growth for small cap stocks, primarily due to their vulnerability to short-term vagaries. Historically, small-cap stocks are the first in the pack to dwindle during a bear-phase.

I see a lot of steam still left in PSU stocks which are playing catch-up with the overall stock market valuations. The PSU sector’s market capitalisation has tripled in the last three years- from INR 15 lakh crores in 2021 to nearly INR 50 lakh crores in 2023. Despite the surge, these PSU stocks account for merely 13 per cent of market capitalisation.

It is worth noting here PSU stocks’ market capitalisation was at 25 per cent during 2009-10, when PSU stocks had a dream run on divestment hopes. This year being the best since 2010 for PSUs, clear visibility on PSU divestment strategy after the 2024 general elections shall help attract further focus by both domestic and foreign institutions.

Most PSUs have a decent dividend record. Among PSUs, SBI, Power Grid and ONGC are favoured by analysts, with ONGC now showing signs of a technical breakout. PSU banks are likely to continue to be the favourites in the portfolio of seasoned investors. State Bank of India, Bank of Baroda and Canara Bank are the preferred names.

To conclude

Investing in stocks is perceived as an alternative to traditional avenues such as Gold and real-estate for quick gains. Yet, undue short-term price fluctuations may hamper investors liquidity, in times of necessity.

A word of caution here: Never invest your savings committed for short-term goals (children’s school fees, marriage expenses etc.). For novice investors, investing via the mutual fund route is recommended, preferably through a Systematic Investment Plan (SIP).

Mutual fund industry data show SIP accounts stood at 7.4 crore with collections of INR 17,000 crores in November 2023. This reflects the increasing retail investors’ participation in the Indian stock markets.