Three Reasons Why Stock Investors Expect 2024 To Be “Nifty”

Three Reasons Why Stock Investors Expect 2024 To Be “Nifty”
Theodora Lee Joseph, CFA

3 months ago2 mins

It’s no wonder they call India’s benchmark stock index the “Nifty.” Lately, it’s been making gains that are just that: nifty, neato, peachy keen. The index, which follows the country’s top 50 companies, has jumped more than 20% since March, beating the S&P 500 and other big markets. And this time around, the rally’s being fueled by more than just some hype and tech trends. Here are three solid reasons why this upward trend might keep going into 2024:

First off, India’s still growing – rapidly. Despite a slowing global economy and a string of interest rate increases at home, India’s own economic output shot up by 7.6% in the three months leading to September. And that’s helped it hold its crown as the world’s fastest-growing big economy. So it’s no wonder investment bank giants like Goldman Sachs and Morgan Stanley expect India to grow by 6.3% or more next year.

Second, China’s fallout with the Western world is playing right into India’s well-stacked hand. Lots of multinational companies are pouring money into Indian manufacturing, as they look to diversify their supply chains away from China. With a population that recently surpassed China’s, there’s a plenty-big workforce to meet the growing demand.

And third, India’s spending handsomely on infrastructure. So its industrial stocks are thriving, as the country gears up for next year’s elections and looks to firmly establish itself as the hotspot for global companies. The country’s set an ambitious goal of going from developing economy to developed by 2047, and has allocated a whopping $120 billion in the latest budget for capital spending – that’s more than double what was spent three years ago.

If there’s one stumbling block in front of Indian stocks it’s that they’re expensive. They’ve got hefty valuations relative to other emerging markets. And that’s long been the case for Indian shares (green line). Currently, the Nifty is 64% more expensive than MSCI’s Emerging Market Index when you look at future earnings – even higher than the ten-year average premium of 47.6%.

To add some Nifty exposure to your portfolio, consider the iShares MSCI India ETF (ticker: INDA; expense ratio: 0.64%), the WisdomTree India Earnings Fund (EPI; 0.84%), or the Franklin FTSE India ETF (FLIN; 0.19%).

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