Mumbai: Indian stock indices have delivered positive returns in a year that saw multiple shocks like war, inflation and steep rate hikes. This was majorly due to relatively steady macroeconomic conditions in India aided by easing of oil prices, robust tax collections, and strong mutual fund SIP flows in the face of a foreign fund selloff.
The external factors that pulled most global indices down in 2022, however, are expected to continue in 2023 — at least in the first half. So the investment tip for 2023 is simple: Buy stocks on dips and don’t sell them for at least 12 months.
Around the same time last year, the primary concern for economists and central bankers was the economic impact of recurring waves of Covid. However, 2022 turned out to be a year that saw inflation spike dangerously high, followed by the fastest interest rate hikes seen in decades.
This year, the overarching concern is stagnant inflation or stagflation. However, analysts say that the focus of central banks may soon shift towards stimulating economic growth by pausing and eventually cutting interest rates. Foreign brokerage BofA Securities expects a 5% gain in the sensex in 2023, while
, another global broker, sees a 5.5% gain. Morgan Stanley sees a 30% probability for the index to gain 30% to 80,000 points by December 2023.
Market analysts in India don’t expect a big drop in the sensex and Nifty in 2023, but they also say that the upside is limited due to high valuations and global uncertainties.
Major world economies like the US and the Eurozone are on the brink of recession due to the rapid rate hikes (which were necessary to bring inflation under control) in 2022. These economic woes have been reflected in the negative stock market returns in most developed economies.
Most analysts say Indian stock valuations have reached levels that may be hard to justify in the short-term and volatility is expected till global woes stabilise. While waiting for a correction may not be a good strategy, investors must avoid bulk investment at this stage, they said.
“As most positives have been largely discounted by the markets, investors need to tread cautiously and look to stagger investments in such a scenario,” said Lakshmi Iyer, who heads Kotak’s investment advisory business.
Some fund managers also said that investors should be selective in their stock picks as some sectors are still not over-bought. “Banking, infra and IT look well poised from a medium-term perspective. Mid- and small-cap spaces may also start to play a catch-up rally,” Mohit Nigam of Hem Securities said.
Shrikant Chouhan, who heads equity research at Kotak Securities, said that manufacturing, BFSI, auto and engineering stocks look attractive for the New Year. “The current quarter will be crucial for IT companies. If the numbers are disappointing, then we can expect some more weakness for tech stocks,” he added.
Analysts added that investors should be relieved that Indian stocks are in the green this year despite multiple woes and that individuals should also look at other asset classes to diversify. “It is prudent to tone down allocation to stocks at peaks like these. Any dip should be seen as a buying opportunity. One should avoid heavy allocation at such levels,” said Manish Hingar, founder of financial planning platform Fintoo.
