The stock market, which is valued at Rs 5 trillion, is expected to grow by 20% this year, driven by government spending and strong corporate earnings, according to market experts.
A recent survey by Bloomberg mentioned that the upcoming budget is likely to boost consumer spending and infrastructure projects, which will benefit businesses.
Over half of the 24 respondents believe that the NSE Nifty 50 Index could rise to 26,000 points by the end of 2024, with some predicting even higher gains.
Benchmark stock market indices continued their positive run on Dalal Street as both the S&P BSE Sensex and NSE Nifty50 hit record highs at Thursday’s market opening.
The Sensex rose to a record high of 80,331.48 at opening, while the Nifty50 surged to 24,372.15.
So far this year, the benchmark index has already increased by 12%, reaching a record high.
The decrease in majority for the Bharatiya Janata Party led by Prime Minister Narendra Modi in the recent elections has led investors to bet more on the consumer sector, expecting the government to adopt more populist measures to gain support.
An early monsoon has also improved the outlook for companies involved in crops like rice, corn, and soybeans.
“Corporate earnings for the past year were strong due to favourable margins and may continue to grow above trend in the financial year 2025, maintaining India’s medium-term growth story,” said Bino Pathiparampil, head of research at Mumbai-based Elara Capital as quoted in the report.
Out of those surveyed, 13 forecasted robust earnings growth for Nifty companies, while five felt the optimism on future earnings was exaggerated.
Analysts estimate that the earnings per share of MSCI India Index’s companies will increase by 15.6% in 2024, according to Bloomberg Intelligence data. By comparison, Chinese companies are expected to see a 10% rise in their EPS for the same period.
Investors are now focused on the budget, due this month, which will outline policy priorities under the new coalition government.
Half of the survey respondents expect the government to prioritise a mix of incentives to support consumption while continuing its capital expenditure on infrastructure.
A quarter of those surveyed believe that the capex push will be the government’s main focus. Another quarter thinks that boosting consumer demand will top their agenda.
The respondents generally agree that consumer discretionary stocks have the most promising outlook, with financial and commodities shares also favoured.
“The government can satisfy everyone with higher capex, social spending, and yet a tighter fiscal,” due to increased tax revenue and a large dividend payout from the central bank, Jefferies Financial Group Inc. strategists, including Mahesh Nandurkar, wrote in a note on June 24.
The budget is expected to benefit sectors related to affordable housing, capex projects, consumer goods, and rate-sensitive businesses, they said.
