Can Dalal Street deliver double-digit gains in Samvat 2081 after stellar growth in Samvat 2080?

After record gains for the Indian equities in Samvat 2080, when both the headline indices clinched their fresh lifetime highs, driven by strong domestic flows and a resilient economy despite global challenges, we are set to usher in the new Samvat 2081 on the auspicious Diwali festival that falls on November 1, 2024.

Sensex and Nifty-50 during this period logged significant gains, with the Sensex and Nifty gaining around 26 per cent and 29 per cent, respectively.

TRIVESH D, COO, Tradejini remarked that Samvat 2080 has been a year of significant ups and downs, with sectoral performances telling a story of volatility, opportunity, and recalibration. Investors witnessed both stellar gains in certain sectors and some much-needed corrections in others, he added.

The market had periods of strong bullish momentum, particularly in the first half of the year, followed by sharp corrections driven by macroeconomic headwinds and global uncertainties.

However, more lately, a major shift came from the foreign investors who began a sell-off spree due to concerns regarding the overvaluation of the Indian markets. Another factor was the stimulus package from China, which aimed at economic reforms to address the housing crisis, which sent out a wave of optimism and investors across the world placed their bets in China.

Nevertheless, as the euphoria that led the rally has begun to cool, here's how market experts believe Samvat 2081 to bode for the Indian equities.

Outlook for Indian stock markets for Samvat 2081

Rajesh Ranjan Sinha, Sr. Research Analyst, Bonanza Portfolio highlighted some of the notable factors that can influence stock market's trajectory going ahead in Samvat 2081:

- Geopolitical Concerns: Ongoing geopolitical tensions, particularly in West Asia, alongside fluctuations in crude oil prices, are critical factors that could impact market stability.

- Earnings Growth: Corporate earnings will remain a focal point as investors gauge the health of various sectors.

- US Election and State Elections in India: Upcoming events like the US presidential elections and state elections in India will also have impact on stock market movement.

- Domestic Inflow: Domestic flows have been a major support for the Indian market, absorbing selling pressure from foreign institutional investors (FIIs). 

Meanwhile, Pranav Haridasan, MD and CEO, Axis Securities noted that Samvat 2081 marks a significant year for the global economy, starting amidst a global rate-cutting cycle. The US FED cut rates last month by 50 bps to 5 per cent- the first such move since the pandemic lows - with expectations for two more cuts before year-end. Back home, the RBI kept policy rates unchanged in its most recent MPC meeting while shifting its stance from 'withdrawal of accommodation' to 'neutral'. That said, we subscribe to the view that a rate cut or two could materialize in Samvat 2081, depending on the trajectory of growth and inflation, added Haridasan.
  
While the long-term growth story for Indian equities remains stronger-than-ever, current valuations leave limited room for expansion. This means that growth in corporate earnings will be a pivotal driver of market returns. Stock picking with a balance of growth - at a reasonable price - and quality will be critical to achieving good returns over the coming year.

TRIVESH D underlined that as we move forward, it’s evident that the euphoria that fuelled the rally has begun to cool. If we compare the data of the last 20 years, Nifty’s annual returns over the past three years have fallen to 13 per cent from a long-term average of 16 per cent. This suggests a narrower trading range and tempered expectations going into Samvat 2081.