Goldman Sachs raises its Nifty50 target to 23,500 for 2024
What's the story
Goldman Sachs has updated its Nifty50 forecast, predicting a target of 23,500 by the end of 2024.
Previously, the target was set at 21,800 due to concerns about global economic factors such as slowing growth, lower Chinese growth, high interest rates, and geopolitical uncertainty.
However, recent events have led to a more positive outlook on global growth and interest rates, particularly due to the US Federal Reserve's dovish stance in December.
Details
Goldman expects five additional US Fed rate cuts
Regarding interest rates, Goldman Sachs's US economists now expect a faster easing of the Fed rate.
They anticipate five additional rate cuts in 2024 starting in March, as opposed to the previous expectation of just one cut in Q4 2024.
This new Nifty50 target suggests a 9% return in rupee terms and a 12% return in dollar terms for 2024.
Goldman Sachs expects India's GDP growth to remain strong at 6.2% in 2024.
What Next?
Strong dometic factors
India's external balances are expected to remain favorable, with a low current account deficit, strong public market capital inflows, ample forex reserves, and minimal external debt, Goldman Sachs said.
"Our economists recently revised India's current account deficit forecast lower by 60 basis points to 1.3% of GDP in 2024."
This change comes as our team now predicts lower oil prices, around $81 per barrel instead of the previous estimate above $90, the company said.
Insights
Are high valuations a concern?
Although high P/E (price-to-earnings ratio) is a concern for many foreign investors, Goldman Sachs believes there is a case for premium valuations.
MSCI India is currently trading at nearly 22x forward P/E, which is 1.6 standard deviation above its long-term average since 2004.
Goldman Sachs believes that although these high prices might drop a little as companies earn more, the overall situation—like the Fed's plans and global risks—suggests prices will likely remain higher than previously expected.