While volatility is likely to play out in 2023 as well because developed economies like the US and Europe are on the brink of a recession and the fight against inflation is far from over, for experts, India is a buy on dips market.
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With 2022 drawing to a close, Dalal Street investors are prepping for 2023 on an optimistic note, as they believe the resilience shown by India to withstand the global shocks has put it in a favourable position to attract foreign capital flows.
About 67% of the 21 analysts reached out by ETMarkets see the NSE Nifty 50 above 20000 points by the end of 2023. Over 72% of the respondents believe that the BSE Sensex will be above the 65000-mark.
Most market mavens expect equities to continue their bull run next year, which will take benchmarks Nifty 50 and Sensex to new highs.
This implies a potential upside of over 9% from the current levels for the 50-stock index, and about 6% upside for the 30-stock index.
On Friday, Nifty 50 ended 0.8% down at 18269 points, and the BSE Sensex closed 0.7% lower at 61337.81 points.
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"For the next decade, India is here only to grow. India is on the verge of a big capex cycle recovery which will play out in the coming future,” said Vikram Kasat - head advisory at Prabhudas Lilladher.
In a base case scenario, Kasat sees an upside of more than 10-12% in Nifty 50 next year.
While volatility is likely to play out in 2023 as well because developed economies like the US and Europe are on the brink of a recession and the fight against inflation is far from over, for experts, India is a buy on dips market.
Capital Flows This year was marked by high volatility as steep policy tightening measures by major central banks to bring down stubbornly high inflation roiled investors, prompting them to dump equities.
Indian equities saw a record Rs 1.22 lakh crore of selling by foreign portfolio investors.
“We expect FII flows into markets to improve as there are early signals of the overhang from China’s zero-covid policy and global rate hike cycle to be coming to an end,” said Vivek Goel, joint managing director and co-founder of Tailwind Financial Services.
In a year that saw the US equities enter into bear market territory, Indian equities have given
net positive returns even after seeing record selling by FPIs. This outperformance has been possible primarily because of strong domestic inflows and encouraging economic growth outlook.
Domestic institutional investors have net bought stocks worth a record Rs 1.7 lakh crore so far in 2022, and experts see them making a new record in 2023.
“Indian equities have shown resilience and outperformed all major global markets in the past two years, with a range of policy reforms implemented over recent years setting the base,” said Devarsh Vakil, deputy head of retail research at HDFC Securities.
Further policy action has empowered people and boosted financial savings, directing flows into equities, so India remains a buy on dips market, Vakil added.
The Contrarians For some foreign brokerages, India is not among the top bet in the emerging markets pack as the stellar performance this year has turned valuations expensive and the risk-reward unfavourable. Currently, the Nifty 50 is trading at a 10% premium to its long-term average.
Credit Suisse’s India Equity Strategist Neelkanth Mishra has warned that the Nifty is unlikely to outperform global markets in 2023.
“Of the three major drivers of market levels, i.e., forward earnings, global price-to-earnings (P/E), and the India P/E premium to the world, it’s the last that is the most stretched. It has been higher than current levels only 2% of the time in history,” Mishra told ETMarkets.
BNP Paribas has downgraded its rating on India to “neutral” from “overweight” due to stretched valuations. Its 12-month target for Sensex is 66000 points and 19650 points for Nifty 50.
BofA Securities expects the 50-stock index to trade in a range of 17000-20000 in 2023.
India was an “oasis in the desert” in 2022. What it will be in 2023, only time will tell.
(Respondents: Anand Varadarajan - Director Asit C Mehta Investment, Vivek Goel - Jt MD & Co-Founder, Tailwind Financial Services, Amar Amban, Group President and head institutional equities - YES Securities, Kunal Shah, senior technical and derivative analyst, LKP Securities, Rupak De - technical analyst LKP Securities, Neeraj Chadawar, Head - Quantitative Research, Axis Securities, Vikram Kasat - head advisory at Prabhudas Lilladher, Sagar Doshi, analyst at Edelweiss Financial, Tushar Pendharkar - equity research Ventura Securities, Anitha Rangan - Economist, Equirus Group, Devarsh Vakil - deputy head of retail research at HDFC Securities, Vinit Bolinjkar - head of research Ventura Securities, Apurva Sheth, head of markets and research - Samco Securities, Nilesh Jain - AVP technical and derivatives at Centrum Broking, Arpit Beriwal, analyst - equity derivatives and technical, Motilal Oswal Financial, Chandan Taparia - head technical and derivatives - Motilal Oswal Securities, Vinod Nair - head of research, Geojit Financial Services)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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