In Charts: Six sectors to watch out for in 2024, according to ICICI Direct

The report suggests that capex cycle, cement, steel, auto, banks and real estate could be the sectors or themes to watch out for in calendar year 2024.

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With green shoots of continued corporate earnings momentum, healthy GDP growth, benign commodity price outlook and possible rate cuts globally, India is in a sweet spot compared to its peers, ICICI Direct said in a report.

The 2023 domestic economy was resilient with signs of revival in private capex cycle, robust infrastructure spending by the government, GST collections and margin expansion, it said. Going into the calendar year 2024, the report suggests that Capex Cycle, Cement, Steel, Auto, Banks and Real Estate could be sectors/themes to watch out for.

For 2024, ICICI Direct’s top picks include UGRO Capital, SBI Cards, NMDC, Uno Minda, Greenply Industries, Birla Corporation and Grindwell Norton.

Capex

In 2024, capex spending will continue to be a key priority. Government capex is expected to grow at a CAGR of 30 percent over FY20-FY24 and the capex to GDP is pegged at an all-time high of 3.3 percent, the report says. According to ICICI Direct, Railways and Roads will see allocation of 6x and 3.3x, respectively, over FY18-FY24. Increased green energy adoption directed capex spending is expected for priority sectors such as fertiliser, refinery, transportation, power, steel, shipping, etc. According to the report, the defence sector is also expected to see a boost with a “focus on procurement of modernised indigenous platforms and arising export opportunities”.

Cement

During FY23-27, the report suggests that cement companies will add around 35 metric tonne capacity annually against the 20 metric tonne per annum addition seen during FY17-22. The sector will also see fresh capex investment worth Rs 1.1 lakh crore for the same period, driven by government spending and growth in the housing segment.

Steel

Over the next five years, annual capex spends for the top 5 steel players are expected to continue to double over the next few years. According to the report, the industry is also moving towards low carbon emissions with an incremental focus on green steel production.

Also read: Budget 2024: Capex on National Highways surges to Rs 2.4 lakh cr in FY23 from Rs 51,000 cr in FY14

Auto

CY2024 could be a big year for commercial vehicles as sales are estimated to hit record highs. According to the report, passenger vehicle (PV) and tractor sales have already surpassed their pre-Covid peaks. The only segment which is seeing some struggle is two-wheelers as it is price sensitive and is lagging due to the impact of fuel efficiency and insurance norms driven price hikes, the report highlighted.

Real Estate

Real estate sales have seen robust growth over the last few years. According to ICICI Direct, this was driven by the industry getting formalised and strong end-user housing demand. Demand is expected to continue into CY2024.

Also read: Year Ender 2023: Mumbai real estate market clocks 1.27 lakh property registrations, 4% higher than 2022

Banks

According to the report, the banking segment is on steady footing after seeing gradual improvement in advances, return on equity and net profit over the last few years. Non-performing assets (NPAs) have also declined, which can be seen with the decrease in NPA provisioning from 2.4 percent in FY2019 to around 1.1 percent in FY2023.

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