How to position your portfolio in 2024?

Globally, in 2023, central banks struck a fine balance between growth and inflation and raised interest rates to keep inflation under check while retaining extra liquidity to support growth. The governments provided fiscal support to boost growth. Outcome was miraculous like- falling inflation though above central bank’s target range, accelerated growth though on fiscal crutches and tight labour markets. Will miracle continue in 2024? Never say never, but miracles don’t happen often too!

          

GLOBAL GROWTH WILL SLOW DOWN IN 2024

The brakes put by central bankers will play its part in slowing growth. the government may have to pursue the path of fiscal prudence as deficit and debt burdens are at record levels. Slowing growth, high debt burden and elections will push central bankers to become Santa in CY24 even against their wish.

 

MARKET BELIEVES US FED WILL BE THE FIRST OFF, THE BLOCK BY CUTTING RATES IN MARCH 2024

The Fed pivot will clear deck for other central banks including India. CY24 will end with a series of rate cuts across the globe.

 

CAN GROWTH SURPRISE ON THE UPSIDE?

This year, elections are scheduled to occur in 40 nations, covering over 40% of the world's population and GDP. Notable events include:

1.         Taiwan's January presidential election

2.         India's April polls

3.         EU parliamentary elections in the summer

4.         The US presidential election in November

5.         A UK election by December

Now, who knows whether the path of fiscal prudence will be followed or not in the election year?

 

INDIA WILL BE AN OASIS IN THE DESERT 

With some luck on energy prices and monsoon India will continue to remain a bright spot in slowing global growth.

 

INVEST IN THE LONGEST DURATION

Generally, when the interest rates are going down, the bond prices rise, and consequently, the NAV of debt funds also increases. The yield curve is likely to trend lower due to rate cuts and liquidity infusion by the central bank. We expect Long-duration bonds to be the best performing fixed income asset class. 

 

RISK RETURN TRADE OFF AMONG LARGE MID AND SMALL CAP FAVOUR LARGE CAP

While large mid and small all trade at a premium to their historical averages. Large cap at 6 % premium to historical average. Midcap is at a 18% premium to the historical average, while small-cap is at a 35% premium to the historical average. So, from a valuation point of view, we estimate large caps will outperform small and mid-caps in 2024. (Source- Motilal Oswal, Bloomberg)

 

DOMESTIC FOCUSED SECTORS, BANKING WILL OUTPERFORM THE BROAD MARKET

Domestic cyclical like auto, cement, real estate and private banks are likely to outperform the market, IT will provide good entry point sometime in CY24 as global growth bottoms.

Focus on quality stocks as governance will override momentum 

 

CAN THERE BE A SHOCK IN 2024?

2024 is a year full of events Geopolitical events from Russia Ukraine, Israel Hamas to China Taiwan can shook the market. There will be many events which we are not able to see which will happen and create volatility in the market. 

 

BUY GOLD

Central bank buying of Gold along with drop in US and global interest rates will turbo charge Gold to higher levels. 
 

Disclaimer

This article is for information purposes only. The information provided herein is derived from public sources, believed to be from reliable sources. However, no representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness or reliability of the information, opinions or conclusions expressed herein. Views expressed herein involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied herein. Kotak Mahindra Mutual Fund/ Kotak AMC is not indicating or guaranteeing returns on any investments. Past performance may or may not be sustained in future. Readers should seek professional advice before making any investment-related decisions and alone shall be responsible for any decision taken.