By Siddhartha Khemka
India braved all the global storms like macros, inflation, interest rates, currency and geopolitics and emerged as a shining star. Despite huge volatility, Nifty has managed to stay afloat with a marginal loss of ~1% (since last Diwali upto 20th Oct’22) while most of the global markets are down 20-30%. India being largely a domestic consumption-driven economy, seems to be on a better footing relative to the developed world which is grappling with high inflation-slow growth challenges. It is expected to grow the fastest in the world at ~6.8% as projected by IMF. Secondly, the driving force behind India’s outperformance is also the delivery of strong corporate earnings growth of 24% CAGR during FY20-22.
Further strong domestic inflows provided stability to the market with DIIs putting in Rs 1.8 lakh crore, compensating for FII outflows of Rs1.8 lakh crore. The festive season is helping in demand recovery along with growth in discretionary consumption after a pandemic-induced hiatus of last two years. Within Broader market, action is expected in select niche segments such as QSR, Apparel, Footwear and Jewellery. The Banking system is seeing a healthy recovery with systemic loan growth at multiyear highs of 15-16% YoY recently. With the revival in credit growth, continued improvement in asset quality and pick-up in CAPEX – there are more catalysts emerging in BFSI.
The strong push for capex both in private as well as government could trigger the revival of an investment cycle in India. Focus on Manufacturing/ PLI/ Exports are also important trigger points. Diwali is a symbol of happiness and prosperity. It is considered an auspicious time to commit to investing and starting your wealth creation journey. Thus, investors who wish to start their fresh investment in equity can participate in Muhurat trading. In Samvat 2079, we expect the equity market trend to remain positive, although intermittent volatility may not be ruled out.
India is likely to outperform its global peers, given its inherent strengths while global economies may remain under pressure due to recessionary fears. Over the next one year, we expect Nifty to deliver a return of 12-15%. We are positive on Indian equities from mid to long-term perspective on the back of healthy domestic macros, strong fundamentals, robust earnings and upbeat festive season. The broader market has been outperforming well and is likely to remain in flavour with action in niche midcap sectors.
Overall we are positive on BFSI, Consumer discretionary, Auto, Retail, capital goods, real estate. Some of the niche segments we prefer are hotels, footwear, QSR, defence, hospitals. Within the BFSI we like SBI, IndusInd Bank, Federal Bank, CAMS. In the broader consumption universe, we like M&M, ITC, Jubilant Food, Zee Ent, Metro Brands, Lemon Tree Hotels from one-year perspective.
(Siddhartha Khemka is Head – Retail Research at Motilal Oswal Financial Services Limited. The views expressed are the author’s own. Please consult your financial advisor before investing)