Where is India's Sensex headed in 2024?

BSE Sensex stood at a low of under 58,000 level in March of 2023 – and yet the benchmark index ended the year up more than 25% at the 72,000 level (read more).

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 “BJP victory” following the state elections in December in which it won three of the four states.

How Sensex typically performs ahead of elections

The portfolio manager now sees a 5.0% return tops in Indian markets before the general elections 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.  

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 (CPI) 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:

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 8.0% GDP growth (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 India really ready to handle that much investment? That’s one question Praveen Jagwani of UTI International raised in her recent statement.

Undervalued Indian stocks to own in 2024

So, in conclusion, while BSE 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.

HDFC Bank 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”.