Indian Stock Market: Experts Recommend Staying Away from These Stocks; Nifty 50 Predicted to Reach 24,600 by December 2024

Analysts recommend avoiding overhyped stocks in sectors with high valuations, such as power and capital goods, while projecting Nifty 50's December 2024 target at 24,600 amidst weak earnings and robust macroeconomic conditions.

The Indian stock market is in a situation where high valuation in some sectors is constraining the potential for investments, while sound macroeconomic environment supports the interest of investors in domestic equities, market analysts have said.

India’s two prominent equity benchmarks, Sensex and Nifty 50 have pulled back about 1% from record highs following a lacklustre sentiment due to the Budget 2024 and dismal earnings season.

“First quarter earnings have been dismal The IT sector has been slightly better but overall market earnings are not strong enough to facilitate upgrades Currently banking stocks are not overvalued and we do not foresee a significant decline in bank shares in the future” Vinod Nair Research Head Geojit Financial Services.

Nair said that he is cautious of the banking industry in the short term, but the IT industry does not seem to be risky when it comes to investments since companies are holding high cash flows, and there are increasing deals in AI.

“There is a sectoral churning in the market. It is suggested that one should book profits in power and capital goods stocks that have already seen a steep run up. Earnings growth should improve in the coming quarters, Nair added. ”

However, following the current high valuations, Nair pointed out that favourable domestic economic fundamentals such as higher domestic demand and a decrease in the retail inflation rate while the wholesale inflation rate is on the rise are expected to support EBITDA margins and realizations of companies. He also believes earnings growth will be better in the next fiscal quarters.

Nair has set the base case target for the Nifty 50 at 24,600 by December 2024 with the bull case target at 26,000 thus showing that there is not much room for growth in the stock market.

In his remarks about Budget 2024, Nair pointed out that government plans are expected to boost the aquaculture industry as well as electronics manufacturing and renewable energy industries.

Also Read: Indian stock market witness an increase in their volatility after the announcement of Budget 2024

But Nair cautions against getting carried away with sizzling sectors like power, capital goods and real estate because they are overpriced. The same was echoed by Avinash Gorakshakar, Head Research at Profitmart Securities who advised investors to avoid sectors such as metals and capital goods as he believes they are overbought.