Investec Forecasts 90 Pecent Probability of Market Correction in 2024; Reveals Top Stock Picks/Reuters
Investec Forecasts 90 Pecent Probability of Market Correction in 2024; Reveals Top Stock Picks
The Indian market has showcased exceptional performance, outperforming major global markets over the past decade and the last year. The significant rise in large-cap (23 percent) and mid-cap (58 percent) stocks in the last year has led brokerage house Investec to believe that a correction (10 percent drawdown) in 2024 is highly probable, with a close to 90 percent likelihood.
Consistent Outperformance of Indian Equities
Indian equities have consistently outperformed global peers, making notable strides in the past decade and the last year. The Nifty index, in dollar terms, has recorded a remarkable 11.7 percent jump over the last ten years, with only US markets (up 12.6 percent) surpassing this growth. In the last year, the Nifty index surged by 20.8 percent, outshining the 22.1 percent jump in US markets.
Probability of Correction and Macro Front Optimism
Investec points out a high probability of a correction in the Indian market, close to 90 percent, though it doesn’t foresee an imminent crash. External factors and geopolitics pose risks, but the brokerage expresses optimism about India structurally resolving its chronic Current Account Deficit (CAD). The macro front anticipates a positive impact on the investment cycle as household savings increase, coupled with optimism regarding the private capital expenditure (CAPEX) cycle, driven by corporate profitability.
Structural Current Account Surplus on the Horizon
Investec predicts that India is on the path to becoming a Current Account Surplus, highlighting a positive shift from the twin deficit scenario. Factors such as thermal coal sufficiency, chemical exports, and import substitution in electronics are expected to contribute to this transformation. The brokerage’s analysis suggests that India’s risk to external shocks will be better managed, potentially leading to a structural Current Account surplus in the next 2-3 years.