The top 5 ASX stocks to watch in April 2024

The outlook for ASX stocks

The outlook for ASX stocks could be on the upswing, as signs increase that the Reserve Bank of Australia (RBA) is fast approaching a shift in its monetary policy settings.

In March the RBA once again indicated that it would refrain from making any adjustments to interest rate levels. The move marks the third consecutive month that the Australian monetary authority has held off on rate hikes, keeping the cash rate target at 4.35% since November last year.

While the cash rate has risen to its highest level in over a decade to put heavy stress on borrowers and variable-rate mortgagors in particular, analysts are beginning to see potential cause for guarded optimism.

In the December quarter, inflation stood at 4.1% in annual terms, for sharp decline compared to the print of 7.8% for the same period the year previously.

If this trend continues, the sizeable easing of inflation could provide more breathing space for the RBA to refrain from further hikes, or even shift into the opposite direction and commence cuts to interest rates in the near-future.

An increasing number of economists are now anticipating cuts to interest rates by as early as the second half of 2024, including analysts at all of Australia's big four banks.

Any decline in interest rates will provide a boost to ASX-listed equities, by reducing the cost of borrowing as well as raising the present value of their future income streams.

The top five ASX stocks to watch

Here is a list of the top 5 ASX-listed stocks for investors to consider in the month of March, 2024.

1. BHP (ASX: BHP)

2. Resmed Inc (ASX: RMD)

3. CSL Limited (ASX: CSL)

4. NextDC Limited (ASX: NXT)

5. Xero (ASX: XRO)

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BHP (ASX: BHP)

As one of the world's leading diversified mining companies, BHP Group Limited (ASX) could prosper in 2024 if commodity prices rise on the back of an eventual dovish shift amongst the world's leading central banks.

While the performance of iron ore prices has been inconsistent, demand could rise in months to come if China follows through with talk of stimulus plans to keep its ailing real estate market from capsizing completely.

Goldman Sachs currently has a buy rating for BHP with a $49.20 price target, forecasting robust dividends from the mining giant in the near term. Analysts from the bulge bracket investment bank expect fully franked dividends of around $2.19 per share in FY24, and $1.95 per share in FY25.

Resmed Inc (ASX: RMD)

Medical technology company ResMed Inc (ASX) has seen its share price perform well in 2024, rising over 13% year-to-date.

Its share price languished in 2023, on the back of concerns over the impact of diabetes and obesity medicines such as Ozempic on demand for RMD's products, which include sleep apnea devices.

In a note on the top stocks to watch, Morgans said such concerns are likely overplayed given the enduring appeal of Resmed's range of medical treatment products.

'While weight loss drugs have grabbed headlines and investor attention, we see these products having little impact on the large, underserved sleep disorder breathing market, and do not view them as category killers,' Morgans said.

'Although quarters are likely to remain volatile, nothing changes our view that the company remains well placed and uniquely positioned as it builds a patient-centric, connected-care digital platform that addresses the main pinch points across the healthcare value chain.'

CSL Limited (ASX: CSL)

CSL Ltd is another ASX-listed medical technology company with the potential to perform strongly in the near-future.

While the large cap company already commands an enormous market with its blood plasma treatments and influenza vaccines, analysts point out it still has further room for growth as the demographic structure of advanced economies continues to shift towards older, more long-lived citizens.

As the elderly demographic expands, this will increase demand for the types of products that CSL specialises in researching and developing. These include new treatments for kidney and iron deficiency, which could emerge as significent drivers of revenue growth in future.

The company has also seen an improved performance since the winding down of the Covid pandemic. Half year results for the 2024 fiscal year point to an 11% rise in revenues and a 17% increase in net profits.

NextDC Limited (ASX: NXT)

In addition to being one of the most iconic supermarket brands in Australia, Woolworths Group Limited also owns the Big W retail store brand and has made forays into the pet care sector.

Woolworths' share price has recently endured tough times amidst heavy inflation, falling more than 11% over the past year to $32.7.

Some analysts are upbeat about the future performance of Woolworths stocks, however, given that the drop in its share price translates into a dividend yield of more than 3%. Goldman currently has Woolworths on its conviction list with a buy rating, and a price target of $40.40.

Xero (ASX: XRO)

Xero is an online provider of accounting software solutions to over 3.7 million subscribers. It focuses on catering to the needs of small businesses with a slew of services that include sending invoices, bank reconciliation, paying bills, expense claims, payment acceptances and payroll.

The company has just entered a strategic partnership in the North American market with US-company BILL - a provider of automated financial operations solutions for small and medium-sized businesses that has more than 470,000 clients.

Xero also hopes to capitalise upon the latest innovations in generative artificial intelligence (AI) with the launch of Just Ask Xero (JAX) as part of its service offerings for clients.

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