BSE Sensex stood at a low of under 58,000 level in March of 2023 – and yet the ended the year up more than 25% at the 72,000 level.So, in every sense of the word, Sensex had a “stellar” 2023. But would it be able to replicate the same strength in the coming months? Perhaps not, says Peeyush Mittal of Matthews Asia.Mittal is convinced the benchmark index has already taken into account “a lot of positives” including the “” following the state elections in December in which it won three of the four states.
There were many question marks around the party’s victory before the state elections, but a lot of that has gone away.
Trade Tracker: Steve Weiss buys $INDA $SMIN $INDY
He breaks down his bet on India. Josh Brown weighs in on why he thinks “Weiss is going to make some money here.” pic.twitter.com/SHTHyOWduJ
— CNBC Halftime Report (@HalftimeReport) February 1, 2024
How Sensex typically performs ahead of elections
The portfolio manager now sees a 5.0% return tops in Indian markets before the scheduled for April and May, as per his recent interview with CNBC.In comparison, Indian markets have historically gained 8.0% in the three months before the general elections. Shantanu Bhargava – a managing director at Waterfield Advisors also sees the BSE Sensex as “priced to perfection” following the exploding rally over the past ten months.
“If you were to compare it with the historical average, a lot of returns have already been discounted [including] the victory of the current government.”
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BSE Sensex Chart
Rate cuts could have an impact on BSE Sensex
Interestingly, though, Bhargava finds it conceivable that the benchmark index ends up having a stronger second half this year especially if the Reserve Bank of India delivers on expectations and begins cutting interest rates in H2.Inflation – or the consumer price index () of India jumped back to 5.69% in December versus 5.50% in the previous month and 4.0% that the central bank targets. According to the Waterfield expert:
If [the RBI] believes that inflation is going to go down durably, then we might see some action in H2 of this calendar year. But it’s completely dependent on the trajectory of CPI in India.
Peeyush Mittal of Matthews Asia also has a similar view on what rate cuts may mean for the Indian stocks in 2024.
Indian economy and the BSE Sensex
Another catalyst for BSE Sensex this year could be continued investments into the South-Asian country as its economy keeps on booming. On Friday, Ashwini Vaishnaw – its union minister for railways, communications, electronics, and IT said India could clock up to (annually) for several years.India received foreign direct investments worth $71 billion in its fiscal 2023 and that number will likely hit $100 billion this year, as per Andrew Holland – the chief executive of Avendus Capital Alternate Strategies who made that remark on CNBC’s “Street Signs Asia” in January.On the flip side, however, is really ready to handle that much investment? That’s one question Praveen Jagwani of UTI International raised in her recent statement.
“The poverty you witness straight out of the Bombay or Delhi airport prevents people from having a high conviction bet.”
Undervalued Indian stocks to own in 2024
So, in conclusion, while Sensex may take a breather before the general elections, it may unlock the next leg up in the back half of 2024.Note that Indian markets have a history of returning 10% in the six months after the general elections. A recent poll of equity strategists conducted by Reuters also suggested that the country’s stock market will print new highs in 2024.Sectors that are particularly “undervalued” in the fastest-growing major economy include financials and consumer staples, as per Ramiz Chalet – a Vontobel Asset Management’s portfolio manager. is one of his top picks in the former sector as “it’s the cheapest it’s been for years now” and Eicher Motors is his recommendation for the latter as it “continues to exceed expectations”.More By This Author:
