India Stock Market Outlook August 2023
The Indian stock market has been the eye candy of foreign institutional investors throughout 2023 taking the NIFTY 50 and the BSE Sensex to their all-time highs. The remarkable rally in the Indian stock market continued in July on the back of robust corporate earnings, recovery in sectors like financials, auto, fast moving consumer goods, and domestic growth. However, tides could turn in August if inflation continues to dampen the market’s sentiment.
The Reserve Bank of India (RBI) maintained its stance of a pause on repo rates in the August Monetary Policy Committee announcement for the third consecutive time with hopes of inflation easing and preparedness to act if the situation merits. The July Consumer Price Index (CPI) inflation figure, however, hit the park as it spiked above the RBI’s tolerance threshold of 4% with +/- 2% to a 15-month high of 7.44%.
Here’s a guide on what market participants expect in August amid hopes of inflation easing and The U.S. Federal Reserve’s commentary on the roadmap ahead for quantitative tapering.
India Stock Market Outlook in August
The Indian stock markets are already at record highs and, hence, in uncharted territory, say experts, with the majority hoping the building blocks will continue to be intact.
Gagan Singla, managing director for JM Financial-backed blinkX, believes the Indian economy is experiencing the Goldilocks effect; where inflation is falling faster than expected while growth is picking up steam at a quicker pace.
One of the trends visible in the market in recent weeks is consistent sector rotation. Sectors like auto, FMCG, oil and gas, BFSI, capital goods and even IT have taken turns as star sectors in the last few weeks, says Singla. He expects this sectoral rotation to continue in August and suggests investors must hold a well-diversified portfolio.
The second big risk is global and it could arise from the Fed and other central banks persisting with hawkishness. If that happens, the cost of funds would go up in India even as global demand gets hurt by a possible economic slowdown. The best way for investors to avert this risk is to stick to the India-centric stories while investing in August, believe experts.
“Investors need to be more fleet-footed in allocations between debt and equity as more frequent toggling will be needed,” says Singla.
A rebound in IPO activity is on the horizon, with growing momentum and larger deals set to break through the constraints of subdued global sentiments and liquidity pressures. Defying the global downward trend, India’s capital market has sustained a vibrant IPO market, though the volume is significantly low compared to the same period last year.
Mahavir Lunawat, the managing director of Pantomath Capital Advisors, believes the second half of the calendar 2023 is expected to be buoyant for the primary market courtesy the more than 70 companies aspiring to hit the street.
“IPOs worth over INR 50,000 crores are in pipeline, with 40 companies having valid approvals from the market regulators. Besides, more than 30 companies are in queue seeking SEBI nod for their IPOs in the range of the same amount. This is quite reassuring,” says Lunawat.
How Should You Invest in August?
Experts warn that after hitting record highs in July, the Indian stock market may witness some profit booking and consolidation in August. Majority of the market participants advise investors to be cautious and selective in their stock picking, as the market is trading at high valuations and may face resistance at higher levels.
Sidhavelayutham Mohanamoorthy, the founder and chief executive officer of Alice Blue, advises investors to be invested in good fundamental stocks in August, to be cautious in keeping position sizing in control and staying away from FOMO trades.
He too suggests investors should try to diversify their investments as it can reduce the overall risk of their portfolio and enhance their returns.
Diversification is a strategy that mixes a wide variety of investments within a portfolio in an attempt to reduce exposure to any single asset or risk so it is recommended to diversifying across different asset classes, such as stocks, bonds, real estate, commodities, and cryptocurrencies, as well as across different sectors, industries, geographies, and time horizons.
In the short-term, experts say investors must expect the Indian stock market to face inflationary pressures in the coming months due to the impact of floods in several states. The floods have disrupted agricultural production and supply chains, which may lead to higher food prices and lower rural demand. It is also expected that higher fuel prices and commodity costs may hurt corporate margins and earnings growth.
Keeping the long-term view in mind, Singla suggests investors focus on three key aspects: “Firstly, asset allocation holds the key. Asset allocation historically explains 90% of returns. Secondly, in an elevated index market, it is a bottom-up approach that would work better. Lastly, investors must bet on futuristic stories like green energy, decarbonization, generative AI, ecommerce etc., where most of the value creation is likely to happen.”
India Stock Market Outlook July 2023
The month of June presented a blockbuster rally in the Indian stock market that led both the NIFTY 50 and BSE Sensex to climb to their all-time highs, not once but thrice. The NIFTY 50 traded near the 19,300 mark and Sensex surpassed 65,000 as the month ended on the back of strong inflows from foreign institutional investors (FIIs), robust corporate balance sheets, moderating inflation and growth picking up coupled with expectations of a normal monsoon season, all of which bolstered the sentiment of market participants.
Amid positive news from domestic quarters, the future for the markets may not all be all rosy with headwinds from international shores arising from the U.S. Fed indicating two successive rate hikes and the war in Ukraine still ongoing.
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Will this rally continue and how you should approach the stock market are questions that we’ll help answer in this guide on the Indian stock market outlook for July 2023.
India Stock Market Outlook in July
India has prospered in a slow-growing global context by offering a chance for sustainable growth at a macro level. Since April 2023, markets have rallied more than 8% year-to-date (YTD) helped by stable macroeconomic outlook and benign crude oil prices.
The Q4 earnings have also been encouraging indicating continued demand traction. The small and midcap indices have outperformed the larger benchmarks during the current quarter, lending strength to the trend of narrowing valuation differential.
Ajit Banerjee, the chief investment officer of Shriram Life Insurance, believes the Indian markets are at the starting point of a mid-to-long term bull market.
“Our country’s strong growth potential, commendable financial results and political and macro-economic stability already make it a wonderful opportunity for FIIs to sustain their inflows. Hence, the outlook for July looks positive,” says Banerjee.
Nirvi Ashar, fundamental analyst at Religare Broking, thinks while easing inflation data and consistent inflow from FIIs will keep on boosting the market sentiment, corporate earnings outcome will keep stock-specific volatility high and concerns with regards to global growth may impact investors’ sentiments.
Poonam Tandon, chief investment officer at IndiaFirst life Insurance, says the recent rally might see markets remaining range bound with a negative bias in the near-term.
Markets are likely to consolidate with profit-taking bias, as Q1FY24 earnings are being discounted, believes Dharmesh Kant, the head of equity research at Cholamandalam Securities.
Kant expects sectors including cement, capital goods, infra, realty, automobiles both passenger vehicles and two-wheelers to do better in July as they all have tailwinds in lower input prices and better sales and volume numbers.
Risks to Avert While Investing in July
When the market is driven by momentum, several stocks that aren’t fundamentally very strong also tend to rise. This situation isn’t specific to the month of July alone. Hence, investors must be cautious while investing and do the required analysis before making investment calls, say experts.
Tandon suggests one should avoid fear-of-missing-out (FOMO) trades as lofty valuation in some sectors and companies makes it more vulnerable for them to fall. Also, risk could emerge in terms of higher inflation and more hawkish U.S.Fed’s commentary than what the market is expecting.
Many believe the market isn’t giving due credit to the potential delay that may impact agricultural output, and thus add to the inflation scare. Therefore, if inflation levels driven by food prices flare up then the Reserve Bank of India (RBI) may have to take necessary steps to arrest inflation as it has made its position very clear in the last monetary policy committee (MPC) meet that inflation control gains more priority at this point of time over supporting growth.
Banerjee says in view of the continued adverse economic conditions in the west, external market-facing companies continue to bear the brunt and hence those must be avoided at this point of time of the market cycle.
For investors an ideal thing would be to diversify their investment across sectors and not invest in one sector or stock, says Ashar.
While investing, top elements to analyze must include opportunities in specific sectors or stocks, management growth plans, corporate governance matrix, debt-ridden companies and stability in the companies financials.
Key Events to Watch for in July
Among the key events to watch for in July include the following:
In July, firstly, inflation data will be an important event to watch as interest rate hike or cut and monetary committee outlook will depend on it. In the domestic market, investor’s main focus will be on Q1FY24 corporate earnings season and outlook by companies’ management. FII activity will also be on radar as from the past three to four months, the Indian stock markets are seeing consistent buying interest that has resulted as one of the key reasons for the recent market rally. Progress of the monsoon in the country considering any delay or below than expected monsoons can impact the rural recovery. Decisions on rates to be taken in the next Fed meeting scheduled in the last week of July Geo-political developments in the Russia-Ukraine region Movement in oil prices include the key events to watch out for in July. How Should You Invest in July?
Irrespective of the underlying market conditions, the basic principle of investments doesn’t change. Staggered buying on well-researched themes and ideas and using intermittent correction to buy good quality companies at decent valuations is always a safer way of investing, says experts.
As a general rule of thumb, one should invest purely on the basis of their risk appetite i.e. the quantum of risk, which they can sustain in the most adverse conditions, investment horizon for which the investments can be made, existing financial commitments or obligations and the investment objective for which investments are made, suggests Banerjee.
Based on these broad principles the asset allocation decision, investment instrument selection, scripts selections are required to be made. Investment decision has to be preceded by a thorough analysis by the investor or managed through a professional portfolio or fund manager as the case may be.
Ashar recommends investors buy and accumulate stocks on dips. “Invest in stocks with quality names and promising long-term growth prospects while avoiding high debt companies. Our suggestion would be to invest in sectors such as BFSI, FMCG, auto, cement for one- to two-year while in the IT sector from two- to three-year perspective.”
Kant finds sectors including capital goods, auto-ancillaries, speciality chemical and pharmaceutical intermediaries, metals and select midcaps looking promising from valuations and earnings-growth perspective.
India Stock Market Outlook June 2023
The month of May witnessed an interesting mix of news for participants at the stock markets across the globe with the U.S. agreeing on an in-principle deal to increase its debt ceiling, Germany slipping into recession, high volatility seen in gold and crude oil prices, while positive data emerging at the home turf with unemployment significantly lower in 2023, the Indian industrial output (IIP) higher on a monthly basis and sudden spikes in inflation well-curtailed.
Key market indices including the NIFTY 50 and the BSE Sensex clocked a near 2.5% rise for the month of May; this performance, though an increase, is fairly lower when compared to last month’s. Top performing indices included auto, realty and consumer durable goods continuing last month’s uptrend.
If you’re looking to invest in the stock markets in June, here’s what you should know.
Stock Market Outlook In June
Since the covid-19 pandemic struck, the Indian stock market became unpopular for moving in the direction opposite to the ground reality, an anathema it broke in 2023 when the stock market embraced shoots of domestic growth coupled with injection of funds by foreign portfolio investors (FPIs).
Data reveals FPIs have invested INR 37,316 cr in Indian equities in May, the highest investment by FPIs in the last six months.
Contrary to expectations and macro challenges, inflation has shown notable signs of receding thanks to continued efforts by the Reserve Bank of India (RBI). India’s retail inflation, which is measured by the consumer price index (CPI), slipped to an 18-month low of 4.70% in April 2023 and the wholesale price index (WPI) declined to -0.92% in April 2023, from 1.34% in March 2023.
These factors have been significant in bringing the much-deserved cheer to the stock markets, experts say.
Sushant Bhansali, the chief executive officer of Ambit Asset Management, is bullish on the stock market growth fueled by foreign flows and domestic factors. Bhansali says, “as an investor, it is the optimal time to buy quality businesses with a long-term hold approach.”
India is also emerging as a strong alternative to China, a factor that is set to open the doors for economic growth in areas including manufacturing, assembly of goods and exports, which is set to be bolstered by the country’s burgeoning working population. Big corporations including Apple and Amazon recently announced big investments in India.
As the economy is looking more stable-than-expected with a robust Q4 GDP rise to 6.1% and an FY23 growth figure at 7.2%, investment and brokerage companies are already beginning to expect the RBI will mull revising rates, albeit towards the lower side.
The chief investment officer at SAMCO MF, Umesh Kumar Mehta, believes the growth momentum has picked up pace and there is a broad-based recovery from manufacturing, mining to construction and farm sectors. “We expect good upside from the markets and some revisions from the RBI in its upcoming policy meetings.”
How to Invest in June
Two key factors to consider while investing in June is the impact the U.S. debt ceiling deal will have on the U.S. market, which is bound to have a trickle down effect on the international stock markets, and the Indian monsoon meeting expectations on the local front.
Raj Inamdar, partner at Triveda Capital, suggests a cautious approach for the month of June given the fact that the debt-ceiling deal still needs to be passed by the Senate and any significant stock market declines may create buying opportunities.
He recommends purchasing public stock in companies with solid financials that may be temporarily impaired by short-term cyclicality that doesn’t impact long-term corporate health.
Bhansali, too, remains constructive on the equity markets from a near-term perspective and sees delayed or below-expectation onset of the monsoons as the only risk impacting the stock market.
Siddhartha Khemka, the head of retail research of the broking and distribution division at MOFSL, believes the U.S. Federal Reserve’s meeting on June 13-14 may bring in some volatility. “Though May meeting minutes have indicated a pause in any further rate hikes, the Fed’s commentaries would provide direction in the near future, especially related to the U.S. banking space.”
He is of the view that bouts of volatility could bring minor profit booking but investors could use buy on dips strategy, as the overall structure remains positive.
Khemka, too, recommends investors to stay put in quality companies where earnings visibility is strong.
From a portfolio perspective, the majority of experts are positive on financials, auto, consumption, capex that includes industrials, capital goods, infra and cement, and growing sectors such as digital retail, fintech and hospitality.
Bottom Line
While the markets are expected to gradually move upwards and remain buoyant in the month of June on the back of healthy corporate earnings, strong macros, and consistent foreign institutional investors buying, it would be beneficial to have a diversified portfolio to remain hedged from a risk management perspective.
India Stock Market Outlook May 2023
The Indian stock markets surprised investors in April with the BSE Sensex and the NIFTY 50 both rallying more than 6% as key indices saw robust pick up in stock prices helped by a strong corporate earnings season, and the Reserve Bank of India pulling the plug on consecutive rate hikes. Indices that showed blockbuster growth this month include realty, PSU banks, auto and small caps.
The stock markets in India had been under pressure with the foreign institutional investors (FIIs) becoming more cautious with investments in emerging markets since the last four months December 2022 onwards. Both the NIFTY and the Sensex bore the effects of subdued global market sentiment hurt by inflation woes and uncertainties in the banking sector as well as the impact of an ongoing war between Russia and Ukraine denting oil prices.
With the market sentiment seeing an uptick globally in April and a revival in FIIs buying in India, expectations of future investments strengthening the home currency, which could help to cool inflation further are being set by market experts.
To understand how you should park your money as an investor, here’s a sneak-peek into how the stock market is expected to perform in May.
Stock Market Outlook In May
The positive momentum of April is expected to continue in May with volatility persisting due to various macro and micro-economic factors, say the majority of experts.
The biggest macro factors denting the markets still exist; from the shift in the power dynamics fuelled by China’s aggression towards Taiwan, U.S.-China ongoing pseudo conflict for supremacy, the continuing Russia-Ukraine war, the U.S. banking crisis and a looming recession.
The impact of macro factors are expected to be mitigated by positive domestic factors acting as tailwinds for investors including the near completion of the earnings cycle, lower-than-expected inflation, and a pause on rate hikes by the Reserve Bank of India.
Sachin Jasuja, founding partner of equity desk at Centricity Wealthtech, thinks the market upswings witnessed at the back of the earnings season has the potential to help markets recoup from the dampened global economic scenario.
Manish Jain, director of institutional business at Mirae Asset Capital Markets, believes the cyclical peak in inflation and the Dollar Index is achieved and emerging markets including India should do well now.
However, domestic downsides such as the uncertainty surrounding the impact of India’s southwest monsoon on the economy should be keenly watched by market participants.
Private weather forecasting agency Skymet has predicted below-average rainfall, while the India Meteorological Department (IMD) has predicted 2023 rainfall at 96% of the long-period average, with a model error of ±5%. This prediction is considered a “normal” year based on early estimates, with a threat of El Nino making an impact. The last week of May will see detailed updates on rainfall and monsoon onset.
While it is highly unlikely India will witness the El Nino effect which is predicted to form by June, if it does, it could have a severe impact on India’s food grain production. “The market will closely monitor El Nino as it could have an impact on various fronts such as inflation, interest rates, low industrial production (due to water availability), and lower tax collections, which could impact the deficit,” says Sunil Damania, the chief investment officer of MarketsMojo.
Despite better performance on the home turf, it is important to remember that the stock market can be unpredictable and subject to various internal and external factors that can impact its performance. Therefore, investors should carefully consider their investment goals and risk tolerance before making any investment decisions and seek professional guidance if needed.
How to Invest in May
Experts say investors should take a longer view and time horizon when allocating their hard-earned savings and investments across asset classes, whereas traders should focus on risk management and tight stop losses to keep their accounts safe, as earnings can cause volatility in the markets, as seen recently in the broader market indices.
Among the key events to watch out for in May include the monetary policy announcements by the U.S. Federal Reserve on May 3, followed by the European Central Bank and the Bank of England’s verdict on rate hikes, which will be widely observed to obtain a sense of their outlook on the economy and the profitability of corporations in those respective countries.
Other factors that investors may want to keep an eye on include oil prices and any potential escalation of war, which could have an impact on global supply chains and lead to increased market volatility.
Given these potential risks and uncertainties, it is important for investors to stay informed and maintain a diversified portfolio, with a focus on long-term investment goals. “By monitoring these key events and adjusting their investment strategies accordingly, investors can help to manage risks and potentially achieve their investment objectives over time,” says Abhishek Banerjee, founder and chief executive officer of Lotusdew Wealth and Investment Advisors.
Earnings in the U.S. often set the tone for general market moves, and we may see a rebound in big tech companies that have corrected severely, says Jasuja.
According to him, the priority should be rules and methods, which include diversification across sectors and asset classes, because well-diversified portfolios can withstand market challenges and deliver a fair compounded annual growth rate (CAGR) growth of the total portfolio.
Banerjee advises investing in either active funds in the mutual fund space or curated direct equity baskets can be a viable option in May, depending on an individual’s investment goals and risk tolerance. Active mutual funds provide investors with the opportunity to tap into the expertise of professional fund managers who actively manage portfolios and make investment decisions on their behalf. On the other hand, curated direct equity baskets allow investors to take a more hands-on approach to investing by selecting individual stocks that align with their investment goals and risk tolerance.
It is important for investors to carefully evaluate their investment objectives and consider factors such as fees, risk, and historical performance when deciding between these two investment options. Ultimately, the decision should be based on individual circumstances and preferences, as well as a careful consideration of the risks and potential rewards associated with each approach.
Tejas Khoday, co-founder and chief executive officer of brokerage firm FYERS, believes monthly movements shouldn’t impact an investment philosophy. The growing trend of opting for systematic investment plans by retail investors inculcates disciplined investing and augurs well in countering the volatile stock market movements for long-term investing.
“While equities might not be the right choice for very short-term investing, sectors with positive prospects like infrastructure, capital goods and discretionary consumption could offer quick gains to investors. Hotels and hospitality stocks could see good returns on the expectation of excellent earnings growth,” says Khoday.
Bottom Line
The stock market can be unpredictable and subject to various internal and external factors that can impact its performance. Therefore, investors should carefully consider their investment goals and risk tolerance before making any investment decisions and seek professional guidance if needed.
India Stock Market Outlook April 2023
The Indian stock market continued to clock a monthly slide in March with the Nifty 1.08% lower and the Sensex down by 1.29% on the back of global uncertainties fueled by a banking crisis and persisting inflation. Major events including the collapse of the Silicon Valley Bank (SVB), Credit Suisse’s buyout by rival UBS, global inflation and continuing geopolitical tensions kept the stock markets on the edge.
Domestic markets in India have been performing in line with the global correction and March volatility is expected to spill over to April given the uncertain situation in the U.S. banking system.
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Here’s an overview of how the stock market is expected to perform, factors to watch out for and risks to avert while investing in April.
India Stock Market Outlook in April
Market participants believe the current correction of Nifty around 10% from its all-time highs has presented a good opportunity for investors to accumulate stocks for the long-term at reasonable valuations.
Raman Chandna, head of fund management at Grip Invest, thinks there is more room for correction if the global turmoil continues given the fact that the Indian stock market is not cheap.
Nifty would trade likely in a broad range of 16,750 to 17,500 levels for the month of April and investors should continue with a stock-specific approach, with a focus on risk management, says Girirajan Murugan, CEO, FundsIndia.
Apurva Sheth, the head of market perspectives and Research at SAMCO Securities, says Nifty is forming a lower high formation on the daily chart which indicates a downtrend, and 16,800 is going to be a key price level for Nifty going forward.
Weak economic prospects in developed markets and relatively higher growth in emerging markets would increase foreign portfolio investments allocation to select emerging markets and India. Similar crises in the past have shown that foreign portfolio investments may temporarily pause, but not reverse course in the longer run.
“Given its structural growth potential, India will likely stand strong relative to other economies despite issues such as high inflation and a weakening currency,” says Kannan Sivasubramanian, the chief executive officer of global research and analytics firm Aranca.
Risks to Avert While Investing in April
The two major risks for investments in April include business risk and market risk.
To avert business risks, investors should analyze the quality of the management, corporate governance and financial strength before investing, says Murugun.
He suggests avoiding debt-laden companies will be a key risk aversion in this high interest rate season given how interest cost of debt-laden companies could eat into the company’s earnings.
Sheth too advises proper due diligence of companies with investing only in companies that have strong fundamentals.
As far as market risk is concerned, taking bets in sectors that could be negatively impacted by further hikes such as real estate, or selecting highly-leveraged businesses with low-interest coverage ratios could expose the investors to greater risks, says Chandna.
The IT services sector in India in particular may bear the brunt of the collapse of SVB and other banks, which may affect their next fiscal growth momentum and the growth potential of some of the large Indian IT firms that have significant exposure to banks under stress, according to Vishal Soni, managing director of Oxane Partners.
Key Events to Watch for in April
Five key factors will likely impact the stock market performance in April. These include:
RBI Interest Rate Decision
The RBI is expected to increase the repo rate by 25 bps in April 2023, as retail inflation continues to remain high (6.4% in February 2023) from the central bank’s tolerance limit of 2% to 6%. RBI’s MPC commentary and decision would set the tone for the markets in the medium-term.
IIP Data/Inflation Rate
Economists are expecting the inflation rate to further decline but unlikely below 6% in the near-term.
Corporate Earnings
Earnings for FY23 will start getting announced and they impact the stock market movement tremendously.
U.S. Manufacturing PMI
The U.S. Manufacturing PMI slated to release would give a better depiction on how deep is the trouble for the U.S. and thereby, for global stability.
FY23 Auto Sales
The FY23 auto sales data will get published in April and it will have an overall sales view for the financial year, which is a key factor.
How Should You Invest in April?
In times of higher market volatility, it is always a good practice to diversify investments. Experts advise sectoral diversification to mitigate the market risk of a portfolio and avoid the risk of heavy losses.
A bright opportunity exists with the majority of the blue chip companies trading flat to negative in the last one year period giving the chance of accumulation. Murugun suggests accumulating blue-chip companies and zero or low-debt midcap companies with strong earnings growth historically in this correction period.
He suggests avoiding sectors which are easily influenced by interest rate hikes like banks, non-banking financial corporations and consumer finance companies, and small-cap stocks for the month of April 2023.
Instead, investors must focus on quality large- and mid-cap stocks and safer bets in sectors like healthcare, pharma and fast-moving consumer goods (FMCG).
Investment gurus are also suggesting this is a good time to add investment-grade corporate bonds in a portfolio with an average duration of two to three years to fixate on high yields.
Bottom Line
Despite expectations of a volatile month ahead at the stock exchanges in India, stock market participants should not panic. Instead, they should consider investing in a staggered manner via the popular systematic investment plans (SIPs) and stay put for stocks to inch back to normal or previously-sustained levels.
India Stock Market Outlook March 2023
March 1, 2023: February was a particularly interesting month for the Indian stock markets. Wild stock movements with key Adani Group companies hitting their upper and lower circuits throughout the month, thanks to Hindenburg’s report alleging corporate misgovernance and alleged fraud by Gautam Adani, kept stock market participants on their heels.
The volatility in the Adani Group stocks were met with uncertainty on the plausibility of rate hikes pausing anytime soon, inflation persisting beyond targeted levels and Russia-Ukraine war seeing no sight of resolution.
On a month-on-month basis, the NIFTY 50 saw a decline of 1.7% ending February 28, 2023 and the Sensex closed 0.62% lower for the same period.
Stock market participants largely believe focus on domestic play is the right investment strategy given the uncertainty around global growth. Here’s what investors should watch out for and what the stock market looks like going forward.
What Should Investors Watch Out For In March
High U.S. inflation has been a key concern through the whole of calendar year (CY) 22. Market consensus estimates factor in a reduction in inflation for the U.S. from 8% in CY22 to 3.9% in CY23. However, inflation may prove stickier than expected on the back of persistent supply side issues and China reopening. Metal prices have hardened over the last three months led by China reopening. Consequently, inflation expectations are lower vs. previous cycles and will need to be monitored.
Investors need to have a pulse of the extent to which the probable recession in the U.S.and the euro zone pans out, as that will majorly affect export-driven companies, especially the information technology sector which has decent weight on the benchmark index.
On the domestic front, earnings estimates in India are expected to grow in mid-teens in the coming two years. Valuations could get impacted if there is too much disappointment from slower economic growth on account of higher commodity prices including high energy prices leading to potential earnings downgrades.
Except for the premium segment, most other consumption categories have seen tepid volume growth over the past few quarters. Demand revival is paramount for overall growth, say industry experts.
Sanjay Chawla, the chief investment officer at Baroda BNP Paribas Mutual Fund, expects three domestic themes to play out for most part of this year:
Firstly, consumer demand is witnessing a rebound. The sector in recent times has not performed well and that provides some degree of valuation comfort with improving profitability.
Secondly, capex (both private and public) is witnessing strong traction on the back of a combination of several factors. He expects industrials to be a multi-year growth theme.
And thirdly, credit or financials are benefitted from an uptick in both consumption and capex. Double-digit credit growth along with historic-low credit costs implies good investment opportunity in the sector, Chawla says.
Sameer Kaul, the managing director of TrustPlutus Wealth, too believes the optimal strategy for equity investments would be to focus on domestic market-driven themes since the Indian should continue to grow at a faster pace than most other large economies.
March India Stock Market Outlook
In the past two years, Indian markets have outperformed emerging markets by a wide margin. This is partially explained by the resilience of the domestic economy when all the emerging markets were faced with the same global challenges.
Decent correction has been observed beginning December 2022 with foreign portfolio investment (FPI) flows seeing some pressure in the new year. The world GDP growth rates are seeing consistent downgrades over the past few months as well.
Currently Indian markets are trading at one of the highest premiums to emerging markets in its history. Although early days, current year-to-date has seen a reversal, with most global indices in the green while our market has seen sustained pressure.
Chawla expects the other emerging markets to catch up and thinks ultimately the resilience of the domestic economy may attract flows back to Indian markets. “Money will chase where returns are to be made.”
Paul believes other markets may continue to outperform our market given the fact that they were quite oversold in the year gone by.
Bottom Line
Given the volatility in global markets as well as domestic growth challenges, investors should ideally stick to their asset allocation and invest as per their risk tolerance levels, says experts.
Stock Market Outlook 2023
It’s been a surprisingly stellar year at the stock market for India with key indices both the NIFTY 50 and BSE Sensex clocking their all-time highs in November. Chiming in domestic investors’ chorus on the incomprehensible disconnect between how the Indian markets perform and the economic parameters on the ground, stock prices have risen dramatically and have set the ball rolling to welcome 2023.
The war between Russia and Ukraine leading to fluctuations in crude oil prices, weakness of the rupee, pandemic-induced global supply chain challenges and the staggering inflation well beyond the consumer price index (CPI) inflation of 4% within a band of +/- 2% range set by the Reserve Bank of India are factors that were set to break the Indian stock market indices’ backs. It has instead been the reverse.
Experts say the road ahead may be full of surprises and putting one’s skill and perseverance in action could help investors build a solid financial corpus.
Key Factors Investors Should Watch Out For In 2023
The year 2022 has been marred by a series of challenging phenomena including inflation, high interest rates, absurd corporate valuations and geopolitical uncertainties led by the fallout of the Russia-Ukraine war, headwinds in China both on account of the country’s zero covid-tolerance policy and political tension with Taiwan—all of which have led to tighter financial conditions and weakened economic activity across the world.
India too hasn’t remained insulated from these macro developments and the country is likely to be impacted further in 2023, albeit to a lesser extent.
After a year of price and time consolidation, fears of a market sell-off have been flagged by multiple stock market participants if the risk of recession looms and the proxy war between the U.S. and Russia over Russia’s invasion of Ukraine continues. Both these events have shaken the global financial markets throughout 2022 and are bound to impact market participants in 2023.
Significant headwinds for Indian investors to watch out for continue to be the expanding trade deficit, persistent foreign institutional investors’ outflows, volatile currency fluctuations and constricting liquidity conditions.
Domestic Investors India’s Strength in 2023
India’s greatest strength lies in its domestic consumption, amply supported by a young and large working population with disposable incomes and boosting business confidence. The opportunities for growth and investment are ample at present and likely to multiply every passing year.
While near-term impact due to global issues could persist and induce volatility, investors with a horizon of at least two to three years would be well rewarded, believes Tejas Khoday, the co-founder and CEO of FYERS.
For instance, a few years ago, the participation of retail investors in the Indian capital market was abysmal, with less than two crore demat accounts. Post-covid, the landscape has changed dramatically, as demat account openings were clocking more than 10 lakh a month. Currently, the total demat accounts stand at 10.43 crore.
Due to benign interest rates in earlier years, investors sought riskier assets through direct equity or systematic investment plans (SIPs) of mutual funds. SIP’s annual contribution increased from INR 43,921 crore in FY17 to INR 1 lakh crore by FY20 and currently registering an inflow of INR 12,500 crore on average per month. In October 2022, the SIP inflow was at the highest level of Rs. 13,000 crores, up 30% (YoY). Total SIP assets under management (AUM) stand at INR 6.64 lakh crore.
In FY22, retail investors infused INR 1.6 lakh crore in direct equities. Consequently, retail investors’ holding in the National Stock Exchange or NSE-listed universe as of March 31, 2022, rose to a 15-year high of 9.7%.
It would be safe to say retail investors have developed a degree of faith in building long-term portfolios and equity investing is slowly becoming a part and parcel of an Indian investor’s way of saving money and thinking about long-term wealth creation.
How To Invest In 2023
Majority of the experts think consumer sentiment will see an uptick in 2023 and the Indian stock markets performance will be stellar in key areas including banking, automobiles, real estate and company stocks with strong fundamentals.
Nikhil Kamath, the co-founder of True Beacon and Zerodha, says as a result of an (expected) relaxed economic tightening and the fact that bond prices and yields move in opposite directions, there is enough room for investment-grade bonds, mortgage-backed securities and other instruments influenced by interest rates to rise in value next year. But an increase in debt defaults would alarm investors looking to invest heavily in the fixed-income markets, especially in the corporate bonds segment.
Kamath sees India’s current account deficit widened to $23.9 billion, or 2.8% of GDP, and the U.S. market contributing anywhere between 40% to 75% of the revenues earned by Indian IT companies, potential U.S. and global recessions pose a threat to India’s IT growth.
B Gopkumar, MD and CEO of Axis Securities, sees the consumer space witnessing a strong revival, and many categories normalizing to pre-covid levels with a structural uptick in multiple sub-segments. “QSR space is well-placed to deliver superior returns,” says Gopkumar.
He expects housing and banking to be crucial sectors in 2023 due to their improved economic outlook and pick-up in credit growth. He also expects affordable housing to get a further push in the upcoming Budget.
Gopkumar recommends investors to avoid export-oriented themes till global growth is back on track.
Saurabh S. Jain, MD of SSJ Finance & Securities, too believes consumer sentiment is set to improve in 2023 and advises investors to invest in companies with good prospects, reasonable valuations, and sound management pedigree.
“We will also advise investors to stay away from commodity manufacturing companies, at least in the first half of 2023,” says Jain.
Nikhil Aggarwal, the founder of Grip Invest, advises investors to look out for a good portfolio mix of debt and equity.
For debt, investment-grade-rated instruments should be on top of the list. With interest rates at peak, it is a good time to lock in a yield for your safer debt instruments. In particular, look out for corporate bonds issued by established companies with strong fundamentals. “There is a new stream of alternate asset classes like lease financing and inventory financing, which are also providing investors with great risk-reward ratios and are helping mitigate the volatility of equity markets,” says Aggarwal.
For equity, Aggarwal recommends going with large and mid-cap stocks, which are more value-based in nature than growth-based. “Companies with stronger fundamentals and less cyclicity are expected to outperform in case of any unexpected turmoil, he says.
Ankit Gupta, founder of BondsIndia.com advises investors to focus on quality stocks, i.e., companies having growing revenue and growth prospects over momentum stocks. “Investors should also look out for USD and rate sensitive stocks as USD is expected to come down”, says Gupta.
Khoday says capital goods, infrastructure, speciality chemicals, and pharma could offer renewed investment opportunities in FY23.
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Bottom Line
As a stock market participant, it is crucial to remember investing in the stock market is risky and you could lose almost all of your invested capital or your gains can simply evaporate. To take a calculated risk on your investment, it is important to research and understand the financial instrument in which you are parking your money. Taking the help of a financial advisor could also help you hedge your risk to a certain degree and aid you in making an informed investment decision.
