Markets off to weak start on first day of trade of 2024; analysts warn of possible corrections

Equity benchmark indices declined in early trade on Monday, the first trading day of the New Year 2024, amid profit-taking after the recent sharp rally and lack of trends from global markets.

In 2023, the BSE benchmark jumped 11,399 points or 19 per cent, and the Nifty climbed 3,626 points or 20 per cent.

On Monday, the 30-share BSE Sensex fell 207 points to 72,032 after a muted beginning. The Nifty declined 47 points to 21,685.

Analysts prediction

Analysts anticipate a brief consolidation in Indian equities before resuming their upward trend. Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd, foresees continued positive momentum driven by robust macros, strong FII inflows, and favorable global cues. The upcoming week is poised to be eventful with the release of significant global economic data, focusing attention on the automobile sector's December sales figures.

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VK Vijayakumar, chief investment strategist at Geojit Financial Services, describes a favorable scenario for both the economy and the market at the onset of the new year. With a robust growth outlook, stability in macroeconomic indicators, and anticipated strong corporate earnings, the economy is on a promising trajectory. He highlights the health of the banking system and foresees stability post-General elections, contributing to this optimistic sentiment.

Globally, Vijayakumar notes signs of a potential soft landing for the US economy, with favorable indicators like the US 10-year bond yield and a stable dollar index acting as market tailwinds. He predicts strong FPI inflows throughout 2024. However, he cautions that while the overall news appears positive, market valuations are stretched, raising vulnerability to corrections due to unforeseen risks. He advises favoring large-caps for safety.

Sharekhan also expresses optimism for 2024, citing promising market highs and healthy economic growth despite global slowdown concerns. However, the brokerage notes stretched valuations in certain segments, particularly evident in the micro-cap rally and fervor in primary market issues, including the SME segment.

Sharekhan emphasizes that while the Nifty's current trailing 12-month price-earning ratio stands at 23.4x, which isn't cheap, it's reasonable considering the expected 12-14 percent CAGR in earnings growth over the next two years.

Overall, the consensus suggests an optimistic outlook tempered by caution due to stretched valuations, advising a careful approach and a preference for large-cap investments in the current market landscape.