Markets set for another growth year despite volatility

Analysts expect more interest in bonds in 2023

The year ahead is expected to remain volatile, amid a choppy global scenario, with recessionary fears and China seeing a resurgence of Covid infections, but Indian bourses are expected to sustain their growth trajectory, analysts told DH.

Although unfavourable global factors took markets the world over for a rollercoaster ride through 2022, they couldn’t deter Indian bourses from ending the year on a high. On Friday, the last working day of markets in 2022, India’s most-followed indices - BSE Sensex and NSE NIFTY 50 - closed with 4.44 per cent and 4.33 per cent year-to-date gains, higher than any of its Asian peers.

“The BSE (Bombay Stock Exchange) is the only outlier versus other top global markets in terms of year-on-year growth,” said Sriram Suryanarayanan, an independent mutual fund distributor.

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Others said that India is likely to carry forward this performance in the next year, although not without some hiccups.

Despite the recessionary concerns in the West, the Russian war in Ukraine, the persistent inflation fears in India and lastly re-emergence of Covid-19 concerns, the Indian market has outperformed handsomely. Stepping into 2023 it is believed that the ingredients are there for India to continue its outperformance, albeit at a slower pace, said Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas.

Others, too, endorsed a growth outlook for Indian bourses in 2023 and expected the corporates to stay consistent on their profitability path. "I expect the acceleration in corporate profitability to continue for 5-7 years in the medium term,” said Suryanarayanan.

He estimated the global slowdown to bottom out by the end of 2023 or the beginning of 2024, post which, he said, companies with an export tilt were likely to do well.

Sharekhan’s Hota, while accounting for possible interim volatility, expected the Indian bourses to offer “a more secular and stable growth story driven by solid fundamentals” in 2023.

However, some felt it was too early to expect growth in Indian markets, with the end of the Russian war not yet in sight and the resurgence of Covid infection fears. “Given these factors, the market will be muted for the next half of 2023 and show bullishness from July onwards. We expect about 8 to 10 per cent return from the market in the year,” said P N Vijay, Investment Banker and Member, Management Committee, BCIC

He expected the banks, particularly public sector ones, to do well in 2023 considering the good credit growth and a tab on non-performing assets (NPAs). “The auto sector is currently booming, and we expect this trend to continue with a further increase in demand from domestic and export markets,” he added.

However, Suryanarayanan pointed out that the price of the oil was the elephant in the room that nobody was talking about.

“With ESG (Environmental, Social and Governance) mandates (kicking in) and a recovery in China during the 2nd half of 2023 is likely to cause a spike in the price of the commodity (it) is likely to affect both the economy and margins of the companies,” he said.

Experts advised investors to be prudent with exposure to quality small-cap and mid-cap stocks.

Bonds

On the bonds front, the record high-interest rates after a series of hikes by the central bank could hurt the governments looking for funds, said experts.

“Globally, the central banks have been keeping the interest rates artificially low, essentially to aid governments’ borrowings. Now, a global structural inflation has come back to bite them, forcing them to raise interest rates. While globally and in India, we are on a correction mode, the uncertainties will persist in 2023,” said Arjun Parthasarathy, Founder, Inrbonds.com - an online bond platform.

Others agreed to the risk posed by the high interest rates but expected interest from investors looking for income alternatives.

“Bonds, especially the higher-rated securities, will attract considerable interest in the new year, especially given the fact that investors will want them as stable diversifiers and income generators,” said Wishlist Capital Director Nilanjan Dey.