ETMarkets Smart Talk: 2023 will see a decisive pivot of foreign investors moving to India from China: Harendra Kumar

In an interview with ETMarkets, Kumar said: “India’s strides are structural and our interactions with FIIs tell us that they are taking cognizance of that. An outcome of 20%+ from year-end prices is not an unrealistic expectation,” Edited excerpts:
Record highs followed by some profit booking post the US Fed meet – what is in store for investors in 2023? Where do you see Nifty50 headed?

2023 is the year when there will be a decisive pivot of foreign investors to India from China. While the narrative is dominated by China’s re-opening trade, in my view it is a myopic strategy and will be a costly misstep.

The construct of the Chinese economy, as we have known and understood it, has been permanently impaired. The historical correlations are broken and are not likely to follow historical patterns.

India’s strides are structural and our interactions with FIIs tell us that they are taking cognizance of that. An outcome of 20%+ from year-end prices is not an unrealistic expectation.

Looking at the recent micro and macro data – how do you see growth panning out in the next 12 months?

Growth will optically look to be benign as the base effect kicks in and some normalisation of Covid imbalances gets corrected.

But underlying trends on revenue collections and credit growth are showing sustainable trends. Growth will pick up speed in H2 of the next fiscal.

Which sectors are likely to remain in the spotlight in 2023 and why?

Apart from banks and automobiles, you (investors) will add infrastructure names into everyone’s portfolios. The order book is getting bloated and translating into good outcomes in the quarterly numbers.

Valuations are also benign there. Power is another interesting space where you are seeing some animal spirits returning.

You have seen some impressive CAPEX and capacity addition lined up in the renewable space by some of the PSUs. Let’s say that we are at the cusp of an investment cycle-led rally.

Do you see a more populist Budget as it is the last year before India goes to poll?

We have seen that a conservative budget has served the govt well in terms of budgeting and revenue collections are beating expectations.

There is ample debate around “revdi”. Unlikely that a contrarian position will be taken to that in the Budget.

Do you see markets gaining momentum ahead of the main event – and economy-related sectors could do most of the heavy lighting? What are your views?

The budget trends have been cast many years ago. The outlay towards railways, infrastructure, and Atmanirbharta has been increasing Y-O-Y. You will see a continuation of that trend.

The fiscal space keeps on getting better for the government with each passing year. Qualitatively the budget spends are reaching the sweet spot where productivity gains will be higher.

People are demanding more public goods in terms of infrastructure and the incumbent government is getting rewards at the hustings on that count. That rules out any course correction from the previous years.


What are your basic expectations from Budget 2023?

Stay the course. Allocate more towards infrastructure, education, health and create more impetus for exports.

India outperformed the globe in 2022 – do you see a similar trend in 2023 as well?

If historical evidence is anything to go by, China saw its weight in the MSCI EM Index reaching a high of 40% from where India was a couple of years ago.

As India becomes a dominant and ‘liquid’ market – flows will chase size and performance. The outcome is imminent.

Any big events that investors should watch out for that could derail D-St bull run?

Of course, the US glide path to growth and interest rates continues to be observed and played. It will have a material bearing on Indian tech stocks.

One can draw conclusions on whether there are more downsides there can be made. The IT index has a significant say on the headline Nifty performance for India.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)