Analysts Set Nifty 50 Target at 24,600 for December 2024: Sectors to Steer Clear Of

With the right strategies, traders in the Indian financial markets can benefit from upside and downside price movements. However, for investors, a long-term bullish outlook is crucial for potential profitability. In this context, the Nifty 50 target is of particular importance. The reason for this is simple: the Nifty 50 offers a snapshot of the market at large. 

An encouraging Nifty 50 target for 2024 could foster positive investor sentiment and allow the market (and its companies) to thrive. However, if the forecast is less-than-favourable, investors may panic and we may witness a massive selloff. 

While the Nifty 50 target is important on the one hand, the prognosis for different shares and sectors in the market also matters. In this article, we delve into both these crucial aspects and answer two vital questions: How will the Nifty 50 fare this year, and what sectors should you avoid? 

To understand the Nifty 50 target for 2024, let us take a closer look at the current state of the Indian stock market. 

The Dichotomy in the Indian Market

Experts have noticed an interesting scenario in India’s markets. On the one hand, we have strong macroeconomic conditions that are conducive to investing in the markets. On the other hand, we have several concerning overvaluations that limit investment opportunities. Simply put, India’s investors want to (and can) invest but do not have sufficiently good market assets to invest in. 

Let us delve into these two opposing scenarios that somehow co-exist today. 

• Macroeconomic Conditions Driving Investor Interest

India has strong macroeconomic fundamentals that continue to attract and retain investor interest in the broader market. Factors like steady GDP growth, controlled inflation and ongoing economic reforms offer a general positive outlook to the Indian economy. This macroeconomic stability offers a supportive environment for businesses to thrive and expand. These factors, together with India's large consumer base and expanding middle class, may lead to a more favourable forecast for the Nifty 50 target in 2024.

• High Valuations Leading to Fewer Investment Opportunities

On the flip side, many sectors and companies in the Indian market are alarmingly overvalued. This makes them unattractive candidates for new investments. These valuations are driven by strong past performance and positive sentiment — but when prices significantly outpace the underlying fundamentals, the risk-reward ratio turns unfavourable for investors. So, is there a limit to how much a company’s share price can climb? Analysts also take this aspect into account when setting the Nifty 50 target for 2024 and beyond.

The Nifty 50 Trajectory

In recent weeks, the Nifty 50 has charted an interesting trajectory. At the start of August, the benchmark index hit the 25,000 mark for the first time in its history. Thereafter, although the index went on to breach this record high during a trading session, it saw a sharp correction of over 3% a few days later.

While some experts opine that the index is now fairly valued, others expect more minor declines. Nevertheless, the Nifty 50 target for December 2024 has been tentatively pegged at 24,600 (in a bearish scenario) and 26,000 (if we see a further bullish run). For context, the index is currently trading in the 24,000s (as of August 14). 

Sectors to Avoid in the Coming Months

Experts may be slightly bullish on the Nifty 50 target, but the nearly unanimous opinion is that many sectors and stocks are highly overvalued in the Indian market. As we navigate this plateau, here are some sectors that have been called out for currently inflated valuations.

• Capital Goods

The capital goods sector, which includes machinery, equipment and infrastructure-related industries, currently faces overvaluation concerns. Despite strong order books (or perhaps because of this), analysts warn of potential headwinds. High valuations may not fully account for risks like project delays and cost overruns. 

The sector’s cyclical nature also makes it vulnerable to economic slowdowns. Still, while long-term prospects may remain moderately positive, short-term volatility and potential corrections may warrant caution in this sector. 

• Metals 

According to experts, this sector, which includes steel, aluminium and other base metals is also plagued by overvaluation concerns. Global economic uncertainties, trade tensions and fluctuating commodity prices all contribute to the sector's unpredictability. 

Additionally, while domestic demand remains encouraging, overcapacity issues and environmental regulations pose challenges. The sector can also be cyclical, making it vulnerable to macroeconomic shifts and geopolitical events. If you want to invest in this sector, you must steer clear of companies with high debt levels and operational inefficiencies. 

• Power 

Despite its crucial role in the country's infrastructural development, the power sector faces the issue of inflated valuations. The shift towards renewable sources of energy, while crucial for long-term sustainability, has created a complex environment in the power sector. Even for power companies that have fair valuations today, future valuations remain uncertain as we transition to a green future. 

High debt levels and stranded assets in the thermal power subcategory further compound the risks. While the government's reforms and growing electricity demand offer near-term potential, the sector's long-term profitability depends on how it adapts to a sustainable future. 

• Real Estate

The overvaluations in the real estate sector stem from optimistic growth projections and price increases driven by growing liquidity. On the one hand, urbanisation and rising incomes support long-term demand. However, on the other hand, the sector faces near-term challenges like regulatory changes and potential interest rate hikes. 

The pandemic has also reshaped demand in this sector, particularly in commercial real estate. With remote and hybrid business models becoming popular, the growth prospects in some areas of the sector remain uncertain. As a broad rule of thumb, if you must invest in this sector, keep an eye out for red flags like high debt levels, geographical concentration and unfavourable valuations.

Sectors to Consider

Knowing what sectors may hold positive prospects is as important as knowing which sectors to avoid. Analysts expect that the manufacturing and consumption sectors may offer attractive investment opportunities over the long term. Other possibly bullish sectors to consider include information technology, electronics, healthcare and e-commerce. The renewables, agriculture and infrastructure segments also have experts’ support. 

Nevertheless, while sectoral forecasts are one thing, individual companies within each sector may have entirely different prospects than the overall sector itself. So, ensure that you perform the required fundamental analysis before you write off or invest in any company. 

Conclusion

Additionally, the Nifty 50 target and sectoral forecasts are undoubtedly significant for investors, particularly those with a long-term outlook. That said, you should not structure your investment strategy based on projections alone. Real-time technical analysis or fundamental analysis is crucial to make holistic trading and investment decisions. 

The Research 360 platform from Motilal Oswal can help you with this. You can monitor any changes to the key indices live on this platform. What's more, you can also see the daily and the 52-week highs and lows and track percentage changes in the index across different time frames like one day, three months, six months and one year.

Sectoral analysis is also elevated on Motilal Oswal’s Research 360. With up-to-date information on the advances and declines in each sector as well as extensive industry analysis, making smarter investment decisions is now easier than ever before.