The outlook for India’s stock market in 2024 appears optimistic, building on the strong performance seen in 2023. The past year marked a dream run for the Indian stock market, and there are high expectations for continued success in the coming year.
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Current bull market started in 2019
The current phase in the Indian stock market is described as a bull market, which began around 2019 with the reduction in the corporate tax rate to 25%. The bull market is seen as a powerful force that transforms the country’s economic landscape. Drawing a parallel with the Japanese bull market in the late ’60s, there is a belief that India is in a productive phase where the economy and the bull market are mutually supporting each other.
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Market outlook 2024
It is acknowledged that a consensus view on the positive outlook for the Indian markets might raise concerns about potential profit booking or other challenges. However, the experts suggest that, despite the historical pattern of bull markets ending with sharp falls, the current market may still have room to grow.
Risks in the bull market
Two main factors are typically considered as risks to a bull market:
Internal collapse due to excessive valuations and external events such as wars or political instability. The greater risk lies in internal factors, such as high interest rates and excessive leverage, leading to a collapse under its own weight. External events, like wars, may cause temporary corrections, but historically, markets tend to rebound from such events.
The rise of the Indian middle class is identified as a key driver of the bull market, with a particular emphasis on the growth of the public sector stocks.
While public sector stocks lead the market, there is also optimism about other sectors. The potential rise in per capita income suggests that consumer stocks, especially in consumer discretionary areas, may perform well. Additionally, technology stocks, particularly those involved in back-office functions, are seen as having a compelling story due to India’s attractive office space and low telecommunication costs.
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Expert advice
The experts suggest against short-term trading in the current market environment, emphasizing the importance of long-term investing. Rather than focusing on booking quick profits, investors are encouraged to identify good quality businesses and hold onto them throughout the duration of the bull market. The goal is to accumulate genuine wealth by maintaining a vision for the future of the country and the companies in which one invests.
If an investor can achieve a compounded growth rate of 22-24% over a lifetime, they can accumulate significant wealth. Hence, long-term investment approach, holding onto investments for an extended period—ideally, 10 years or more is important. This aligns with the principle of compounding, where the longer the money is invested, the more it can benefit from the compounding effect.
If an investment grows at a compounded rate of 22%, the money roughly doubles every 3-4 years (Rule of 72 >> 72 divided by the growth rate).
It is therefore very important to remain invested and resist the temptation to engage in frequent trading. The idea is to have conviction in selected good-quality businesses and retain ownership throughout the duration of the bull market. This approach allows compounding to work over an extended period.
Disclaimer:
The above content provided regarding Market outlook 2024 in this web post is for informational purposes only and should not be construed as financial advice. Readers are encouraged to consult with financial professionals before making any significant financial decisions.
