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Where is the Indian market headed in 2023 amid geopolitical shocks? | Jobs Vox

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In the year 2022 may go down in history as the year inflation reared its ugly head. Geopolitical shocks since the Russia-Ukraine war have fueled global inflation, driving up energy – crude oil, coal and gas – and food prices. The US Federal Reserve, thereafter, began a cycle of rate hikes. And this, in turn, now raises the threat of global collapse. The silver lining, however, is the performance of India’s equity markets. Benchmark indices CNX NSE Nifty and S&P BSE Sensex delivered year-to-date returns of about 4% each, even touching all-time highs during the period.

What does 2023 hold for Indian investors? Mint They talk to four money managers about what investors can expect from the equity market in 2023.

Market view

Money managers Mint spoke to say investors should have moderate expectations.

Nilesh Shah, who heads Kotak Asset Management (which manages the assets of mutual fund investors 2.8 trillion) says, “The 2023 outlook is still cautiously optimistic. Our markets have had to deal with many dynamic and global events. All these events are still playing out. The Russian-Ukrainian situation has not yet been resolved. The US Fed’s war on inflation is far from over. Oil prices may increase due to cartelization or geopolitical events. Globally, the outlook for growth looks bleak with fiscal and monetary tightening policies expected next year. Equity markets tend to be volatile and returns can be similar to debt funds.”

Nelesh Surana, Chief Investment Officer (CIO), Mirae Asset Investment Managers (India), says, “When it comes to global macros, it’s difficult to predict how things will pan out. So investors should just try to maintain discipline, use Strategic Investment Plans (SIPs) and don’t invest too much. 1.09 trillion Mirae.

Sunil Singhania, former global auto-equity at Reliance Nippon MF and now founder of Abacus Asset Manager, is bullish about the future. He said India’s attractiveness as an investment destination compared to other countries will strengthen next year. Emphasizes on 4Ds that benefit India: Democracy, Demography, Domestic Economy and Digital Infrastructure. Compared to the dynamics in countries like Russia and China, 2022 shows the benefits of being democratic. A young demographic, healthy domestic economy and digital infrastructure are structural drivers, he said.

A view of the field

2022 sees banking stocks deliver strong returns. However, Shah feels, going forward, the infrastructure sector could do well. “Before, we were in engineering and capital goods for a long time. But the infrastructure cycle, from construction to cement to real estate, appears to be slowing down and in a favorable position for growth. We believe that infrastructure as a sector could be better next year.

Rural consumption and manufacturing are other themes where investment managers are bullish.

“We expect a recovery in rural consumption on the back of higher pre-election winter crop production and higher rural spending, which will be reflected in the improvement in non-farm employment. Good rains and government’s thrust on agriculture will help rural recovery,” said Surana.

Singhania agrees that the rural economy should do well after good rains. “Hopefully, we can end up with a really good product. On top of that, agri-produce is fetching good prices now. Therefore, the rural economy should do well,” he says.

In the manufacturing sector, the benefits of India’s push by the government and China+1 policy are being seen on the ground, he said. “Apple phones are now being manufactured here in India. They are seeing exports go faster,” Singhania pointed out.

Surana is also big on the Make India theme. In this, he expects health care services to be good. Automobile is another sector. But he says that capital goods can be removed at this time. “While earnings visibility has improved due to growth in order book, domestic, efficiency and so on, the optimism in the capital goods sector is more than built into the valuations of these companies. So, on valuations alone, we are not bullish on the capital goods sector. Sometimes good businesses are not as good stocks.” They may not be,” he pointed out.

Surana says investors should keep an eye on how trends play out for globally oriented sectors.

The risk of global collapse

Unexpectedly, monetary policy was tightened significantly. There has been a regime change in interest rates. So it will have an impact in 2023, especially in the first half. Therefore, world growth excluding China is bound to decline. But it depends on the duration of a mild recession or a soft-landing of high interest rates. But we can’t be sure about the impact,” Surana said.

Sarab Mukherjee, founder of Marcellus Investment Managers, is of the view that the threat of a global recession has receded. “The data from the U.S. is clear. The U.S. reported a slowdown in global inflation, mainly due to the Fed’s rate hikes, falling oil and commodity prices, with the U.S. reporting a four-quarter decline. So, the pressure for rate hikes is easing. Both in the West and in India.” There may be two more price hikes,” Mukherjea said.

“Core inflation, which has led to significant price increases over the past 12 months, has moderated significantly. Therefore, the volatility that led to two-quarters of negative GDP growth in the US in 2022 will not exist next year,” he added.

The road ahead

If global events disappoint market expectations, there could be periods of volatility next year. Experts say investors should focus more on how to respond to these events. “If the Russia-Ukraine situation worsens and there is a correction in the market, depending on the extent of the expansion, it could provide an opportunity to add stocks. If there is a correction due to Fed policies, investors should be in a position to capture that in their portfolios,” Shah said.

Investors should be cautious as markets discount good news domestically and bad news globally, he added. “They need to adopt orderly asset allocation. A ‘buy on dip and sell on rise’ approach may be needed,” he says.

Investors who invest in SIPs with Surana’s expected average return of 12% CAGR (compound annual growth rate) over a period of three-five years will not be disappointed.

Investment managers agree that India’s economy should do well in the long run. “Broader economic conditions in our country seem healthy. Job creation, especially in the formal sector, is happening at a good clip and the banking system is in good health. In our view, well-run Indian companies will continue to grow between 15-20% revenue growth and 15%-25% profit growth.” says Mukherjee.

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