Nomura, a brokerage firm, predicts that Indian stocks will continue outperforming their global counterparts, citing steady macroeconomic conditions, an optimistic mid-term growth forecast, and clearer earnings visibility.

What Happened? Per a CNBC report, Nomura’s confidence also stems from strong local investment into equities via mechanisms such as Systematic Investment Plans (SIPs).

Indian markets currently trade at a premium of around 60% compared to the Emerging Market index. Due to a resilient growth forecast, Nomura also anticipates limited earnings surprises in the mid-term.

While short-term growth in equity markets seems modest amid cyclical downturns, Nomura believes the long-term growth foundations are robust. It suggests any market downturns as buying opportunities.

Nomura forecasts a 6.6% growth for India in the mid term, driven by reforms and increased capital expenditure. While global slowdown and delayed impacts from monetary policy tightening may hinder short-term growth, India’s underlying fundamentals hint at a brighter mid-term outlook.

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Sectoral Spotlight: Nomura prefers sectors and companies focusing on the domestic market, particularly those benefitting from the government’s investment-led growth push. Its top picks include Larsen & Toubro, KEC International, and Honeywell Automation.

Nomura also favours financial institutions like ICICI Bank, Axis Bank, and IndusInd Bank, viewing them as direct beneficiaries of India’s growth story.

However, Nomura foresees potential demand uncertainty for Indian IT services companies in 2024 due to likely tech budget cuts for cost savings. Similarly, it expects a short-term correction in the appliances sector due to high valuations and a cyclical downturn.

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