Large Caps To Take Spotlight In 2024, Says ICICI Prudential's S Naren

Note: This interview was recorded on Dec. 6.

The boom in large-caps has just started in the markets and will continue in the new year, according to S Naren, chief investment officer of ICICI Prudential Asset Management Co.

The major movement and growth in the market will be driven by large-cap stocks as they "take the spotlight" in 2024, Naren told NDTV Profit's Niraj Shah in an interview on Dec 7. Returns are expected to hinge on the participation of overseas investors, he said.

If FPIs do invest, the markets will witness positive returns, he said. "If FIIs do not invest, I do not think the returns will come." Domestic investors seem to have already invested a significant amount, according to Naren.

Historically, during election years, the extent of market rally is closely tied to the amount of FII funds that enter the market, he said.

With the current market conditions, it's evident that no pocket is very cheap, according to him. The extensive bull market has led to a situation where the scope does not exist at this point of time, Naren said.

"India is one of the few structural stories in the world at this point of time."

Banks are expected to offer reasonable returns, and as a sector, they are not underinvested, according to Naren.

If foreign institutional investors receive additional funds, banks are likely to be the preferred sector for their investments, Naren said. The banking sector is anticipated to perform well in the scenario of increased inflow of funds, he said.

Conversely, if there is an outflow of funds, this sector will likely face selling pressure, as investors might choose to divest from it. "Banking is dependent on flows."

When dealing with non-banking financial companies, it's crucial to exercise caution and focus on valuation analysis, rather than just risk analysis, Naren said.

"The deposit market is equally important. The people who are able to raise resources cheaper, I think they are in a good situation, whether in banking markets or NBFC markets," he said.