Samvat 2080 holds promise of an election rally but crude could play spoilsport

• Samvat 2080 which will come into effect on Diwali day, holds great promise, say analysts.
• A few of them expect a rally based on the outcome of the 2024 general elections next year.
• Midcaps, which saw a good run in Samvat 2079, might see investment opportunities if the broad economy recovers.
  

Never has there been a year ahead with as much promise as uncertainty. While rising bond yields, a war in the Middle East are global drag factors, India has a lot to look forward to in the upcoming Samvat 2080. The key factor is general elections to happen next year. Most analysts hope it will drive up benchmark indices to new heights.

“The resilient Indian economy and good corporate earnings will attract big investment into the market. The bull case scenario is a flood of institutional money -- both domestic and foreign -- and a stable government triggering a big rally in the market taking the Nifty beyond 23,000 by next Samvat,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.

In spite of global volatility, India remains in a favourable position for growth, which will drive Indian equities in the foreseeable future, says Pranav Haridasan, MD & CEO, Axis Securities.

“The improvement in the balance sheet strength of corporate India and the much-improved health of the Indian banking system are other positive attributes. They will ensure that Indian equities readily deliver double-digit returns in the next 2-3 years with the support of double-digit earnings growth,” adds Haridasan.

The Samvat that was

Samvat 2079 has not been too bad for equity investors — thanks to the bull run seen since April this year. Over the last 12 months, Nifty50 with 14.8% returns outperformed the MSCI EM index which saw 12% returns. The premiums were driven by stable macros, broad based earnings growth and robust banking and corporate sector health.

Moreover, mid and small cap investors have a lot more to cheer about. Nifty Midcap 100 index went up by 22.7%, while Nifty Smallcap 250 went up by 28%. Large caps paled in comparison, with Nifty 100’s 4.3% returns in the last one year.

Tata Mutual Fund’s equity view believes that there may be more investment opportunities as their headline valuations are in an acceptable zone. “Midcaps in a growing market with market leadership and low leverage may be considered on par with large caps. Broad-based economic recovery would also result in more investment opportunities in mid and small caps,” it added.

But a possible election rally will be led by big companies, analysts predict. “Large-caps across sectors will lead the rally. The likely outperformers are financials, capital goods and automobiles,” said Vijayakumar.

Most analysts also back banks, capital goods, manufacturing and pharma sectors, and negative on companies that are based on urban consumption and commodities.

The crude oil prices have been extremely volatile in the last few weeks oscillating between $88-96 per barrel in the last month and the Israel-Hamas war is adding more fuel to fire. Any downside movement can alter the valuations premiums of Indian markets in the upcoming Samvat that will start on the day of Diwali.

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