With little visibility on the global macro environment, experts are reluctant to call a trend for India’s stock market in 2023. Some believe in the de-coupling theory, saying India will outperform peers, but are not sure to what extent. Most are betting on the Aatmanirbhar theme at a time when exports are vulnerable to slowing global trade. What’s certain is that strong local investor appetite could make the Indian market as resilient and exciting as in 2022.
Andrew Holland, managing director, Avendus Alternate Strategies, isn’t a big believer in the decoupling theory. However, he points out that at some point the Fed will stop raising rates and so will the Reserve Bank of India.“We expect this could happen around March or early April after which the markets would start focusing more on equities and growth areas,” Holland told FE, adding a 12% return should not be out of reach.
Rashesh Shah, chairman and CEO, Edelweiss Group, says inflation and interest rates have to stop going up for investors to start buying big. “It could be just another 5-6 months of uncertainty, but the fact is that the recession has been priced in. There may be some pressure on global liquidity until March or early April but post that we should see an uptick,” he said.
Sridhar Sivaram, investment director, Enam Holdings, believes 2023 could be a tough year given the challenges in the global economy. “Apart from the geopolitics and inflation, there is now the chip issue in China and we need to weigh the trade implications of this. While India is looking good within the EM universe, we need to tread carefully because we don’t know to what extent we can escape the global shocks,” Sivaram said.
Shankar Sharma, joint managing director, First Global, is convinced India will outperform other major markets in the next 12 months, by a significant margin. “Strong domestic demand, which had been curtailed over the past five-six years due to a variety of factors, is propelling company numbers significantly without need for major government stimulus. Small caps, well chosen, are going to deliver great returns,” Sharma said.
Edelweiss’ Shah believes that while the economy may not grow at more than 12-13% in nominal GDP terms in FY24, balance sheets are strong and corporate earnings could grow at 14-15%. “However, it is a concern that household balance sheets are not as strong and that could put a lid on growth,” Shah said.
Sivaram is cautious on earnings growth since the local recovery is a K-shaped one. “While the premium segment is doing well and there are opportunities, export-facing companies face challenges,” he said.
Ahead of the current earnings season Kotak Institutional Equities estimated an EPS (earnings per share) for the BSE 30 of
2,685 for FY23 and3,006 for FY24. For the Nifty 50, the estimated EPS for FY23 was 811 while for FY24, it was `930. This then means that at 17,545, the Nifty trades at 18.8 times the FY24 earnings while the Sensex, at 59,203, trades at 19.6 times.
Foreign portfolio investors (FPIs) have been sellers of Indian stocks in 2022 having pulled out $225 billion. But domestic financial investors (DFIs) have bought stocks worth `2.63 trillion (about $30 billion). Holland believes India and some other emerging markets will stand out in the coming year. At the same time, India is more expensive relative to peers so other markets like South Korea may get a larger share of the flows, he said. “Returns in the region of 12% plus can be expected and within that some sectors would do better,” Holland said.
Veteran investor, Ramesh Damani believes the Indian markets should do well in the coming year and that even the global markets may have bottomed out. “The earnings season has got off to a good start and I feel earnings growth should be reasonably good in FY23. While a 6-7% GDP growth might not be great, it is still good,” Damani said.