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  • Writer's pictureTikona Capital

2024 - Year of Opportunities !

The year 2023 vs 2022

Following a challenging 2022, 2023 proved to be a year of recovery, NIFTY with strong growth of about 20% in CY2023 compared to a meagre 3% in CY2022. Globally, except for a 15% decline in the Chinese and Hong Kong markets, the markets recovered between ~14% and ~25%. Notably, the NASDAQ jumped 45% while the S&P 500 increased by 25%. Healthy returns of CY2023 were on back of negative returns in the range of negative ~8 to ~34% in CY2022 with NASDAQ falling the most at 34% and an exception of Indian markets (positive 3%) being stronger than the world.

The year 2023 was not without difficulties, though, as interest rates reached previously unheard-of levels, sparking fears about future economic growth and recessionary expectations in the developed world. Despite challenges, Indian markets a number of sectors saw outstanding performance, with real estate (up 78%), PSE (up78%), and Autos (up 45%) showing particularly strong returns. The outstanding returns were delivered for BSE SME IPO index delivering 91%. Abundant liquidity fuelled the IPO markets with astounding oversubscriptions. Moreover, the shift in ownership dynamics, marked by higher domestic ownership and strong inflows, added strength to the market.

Global Economic Scenario

In the context of the global environment, the US showed encouraging growth despite early worries about a recession. Conversely, the Euro zone experienced economic recession while China struggled with real estate worries. Even though there were fears of a recession throughout the year, falling inflation and expectations of a rate cut in 2024 sparked optimism in risk assets and the global market by the end of the year. In addition to the possibility of inflation returning, geopolitical concerns continue to pose a threat to the world economy. Throughout the year, it is important to keep an eye on elections and the vacancy rates of commercial assets in the developed world.

Where is India different?

Being the fastest growing economy, incrementally India is likely to play a major role in the global economic growth. Projections provide a compelling view, expecting India's rise as the third-largest economy during Amritkaal. India's economic prospects unfold with a positive narrative, projecting a 7% growth rate in 2023 and promising growth potential surpassing many larger economies. The robust balance sheet of government, Households and business, reinforced with strong forex reserves, and progressive digital initiatives, positions India favourably in the for a sustainable growth in its period of AMRITKAAL.

Market outlook and opportunities

While the path of achieving the third largest economy based on sustainable growth remains possible, it is expected to present enormous opportunities. A trinity of Demography, Digital, and Entrepreneurship will fuel formalisation and long-term prosperity in this century. India has already demonstrated its growing importance in global markets by being included in the JP Morgan bond index, in global politics with the G20 meet, and in the universe by landing on moon! With megatrends such as young population, urbanization, transportation infrastructure, climate change, digitalisation, globalisation, power shift to east, rising of women power, and spiritual awakening at play, Bharat is ideally positioned to transform and establish a multi-wave growth ecosystem.

We are fully immersed in the wave of digital public infrastructure for Aadhar, UPI, and GST and reaping the large-scale benefits for every section of the society. In his book Rebooting India, Mr. Nilekani makes recommendations for digital transformation in several areas, including politics, health, education, and the judiciary. These reforms aim to

eliminate significant societal obstacles and leverage digital public infrastructure to promote inclusive growth. The complete implementation of these reforms is still work in progress and may accelerate post elections, but once they do, the lives of people in Bharat would dramatically transform.

Productivity increases are anticipated to begin in 2024 and beyond because of significant investments in technology and renewable energy that were fuelled by the low interest rate environment in the previous decade and intensified post-COVID. Falling Global inflation and Interest rates in 2024 likely to support the risk assets and especially emerging markets. Foreign inflows are expected to resume in 2024, supportive earnings growth of 15%+ CAGR tilted towards domestic market and reasonable valuations are likely to drive markets in 2024.

Expect first half to be a volatile however second half of 2024 would catchup on the upside trajectory. We are seeing opportunities in Banks, PSU banks, MFI, Manufacturing (EV, engineering, defence), consumer discretionary and to balance portfolio with Chemicals and IT which are likely to come back by year end. However, would keep a watch on geopolitical issues, supply chain issues and evolving election scenario. This year will be year of opportunities but only for investors who stay invested to reap the benefits of AMRITKAAL!

Sumit Poddar

Chief Investment Officer & Smallcase Portfolio Manager

Tikona Capital

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