ETMarkets.com“Investors can consider infrastructure and logistics companies as attractive opportunities ahead of the Budget. Similarly, the railway sector is also expected to attract support from the Budget, making it a good buy ahead of February 2023,” says Raghvendra Nath, Managing Director – Ladderup Wealth Management.
In an interview with ETMarkets, Nath said: “The Budget could also offer benefits to segments like Defence, PSUs, and renewables, making these interesting buys for savvy investors.,” Edited excerpts:
How do you sum up the year 2022 and where do you see markets headed in the year 2023?
The year 2022 has been both challenging and rewarding for investors. Throughout the year, and especially in December, investors have faced excessive volatility, with the market witnessing significant spikes and dips on the back of a number of positive and negative cues.
Sticky inflation and consequently high-interest rates were constant themes in 2022, along with geopolitical tension owing to the situation in Ukraine.
Despite a variety of concerns, the Indian stock market maintained its position of strength during 2022, and the Sensex reached the milestone figure of 63000 this year.
Positive cues for 2023 include sustained economic growth, political stability and ongoing recovery in global stock markets.
As we close another year of gains in equity markets – do you see the bull run continuing in 2023. Which are the headwinds that one should be aware of?
There is no doubt that 2022 was a year run by bulls, and this run is expected to continue into 2023, thanks to a variety of positive cues around India’s growth and consumption trajectories.
However, the picture cannot be considered entirely rosy. Some of the domestic headwinds that investors should be aware of, while rebalancing their portfolios for 2023, include India’s expanding trade deficit, continued outflows of foreign institutional investment, currency fluctuations and the RBI’s sustained attempts at lowering systemic liquidity.
On a global scale, the equity market may face headwinds from further rate hikes by the US Federal Reserve, negative developments in the Chinese economy and the probability of a COVID resurgence.
New Year will also mark the beginning of Budget 2023 preparations. What are your expectations from Budget 2023?
Budget 2023 will mark the last full year budget, helmed by the current government, ahead of the Lok Sabha elections which will be held in early 2024. This means that the government will be hard-pressed to ensure sustained growth, while also maintaining a check on fiscal deficit and inflation.
These measures would help boost public support for the incumbent government, which is a key ask ahead of elections.
In this scenario, we expect the budget to strongly focus on economic growth and development while also promoting the government’s popular initiatives like AatmaNirbhar Bharat and Make in India.
For this purpose, the Budget is likely to offer strong cues for the manufacturing industry, including tax incentives on capital or operational expenditure for expansion, application of innovative technology and capacity utilisation.
We also expect the Budget to provide incentives or support to renewable energy measures, given the country’s focus on sustainability in the near and longer term.
Which sectors will be in focus ahead of the Budget? We have already seen some rally playing out in sectors like Infra, Rail etc.
Indeed, there is no doubt that sectors like infrastructure and railways will be in focus ahead of the Budget. This is because, on a historic basis, infrastructure has seen strong movements prior to the announcement of budgets.
In this Budget, market players are looking forward to possible allocations towards PLI schemes as well as a sharpened focus on infrastructure growth and these triggers are prompting rallies in the sector.
Accordingly, investors can consider 1)infrastructure and 2)logistics companies as attractive opportunities ahead of the Budget.
Similarly, the 3)railway sector is also expected to attract support from the Budget, making it a good buy ahead of February 2023.
Sustained growth in the sector, as well as the probability of divestment in public sector rail units are additional cues attracting investors to railway stocks.
Other than these two sectors, the Budget could also offer benefits to segments like 4)Defence, 5)PSUs and renewables, making these interesting buys for savvy investors.
Defence manufacturing and export are two arenas that the government is extremely keen on, and we expect these agendas to be in focus during the Budget.
In such a scenario, it makes sense for investors to build positions in this sector ahead of the Budget. The sector is also enabled by solid order books as well as the government’s consistent push towards localisation.
Moving to public sector undertakings, there is a possibility of the budget offering cues on divestment in the near future.
Strategic divestments are visualised across major PSUs including NMDC, Shipping Corp, Container Corp, IDBI Bank, Hindustan Zinc etc., and these companies could witness buying interest in the run up to the Budget.
Lastly, with India keen on achieving a net-zero carbon emission status by 2070, renewables will act as another focus segment for the Budget.
This is prompting many investors to turn towards clean energy and energy transition companies, making them a focus sector ahead of the Budget.
Do you see tinkering with the Income Tax Slab in this Budget?
In keeping with the fact that the 2023 Budget is expected to be a populist one, there is a possibility of the government undertaking some tinkering in the income tax slabs.
While some market participants expect the tax rate to drop from 30% to 25%, in the run up to the elections, there is another cadre that thinks that an increase in the threshold limit for the higher tax income is possible, with the benchmark rising from 10 lakhs to 20 lakhs.
We are also foreseeing the possibility of an increase in the limit for investments under Section 80C, which is currently at 1.50 lakhs.
Such an increase would prompt taxpayers to save a larger part of their income, which could help in reducing inflation to an extent.
Alternatively, the lower tax outflow could help boost disposable incomes and bolster consumption, which would be beneficial to economic growth. In both these scenarios, tinkering with the income tax slab would be a win-win for both the government and the tax-paying populace.
Which themes will do well in 2023 and why?
As a structurally upbeat country with a stable political regime, India is expected to maintain a positive performance in 2023, and some of the themes that could do well include higher consumption, enhanced financial inclusion, and digitisation as well as shifts in supply chains, among others.
In terms of higher consumption, we expect urban incomes and improved job creation to prompt consumption among the affluent and middle-class segments of the populace.
This will, consequently, bolster consumption-related sectors such as automobiles, telecom and consumer discretionary stocks, making it an attractive theme for 2023.
Next, up, we see continued infrastructure ramp-up as an ongoing theme in the new year, with possible opportunities inherent in sectors such as transport, electricity, piped gas, affordable housing, sanitation access, and tap water coverage.
2023 is also expected to witness a revival in the capex cycle, thanks to strong capital expenditure from the government and private companies.
Another theme we are keeping an eye on revolves around the Indian financial services space, which is witnessing growth momentum thanks to the government’s laser-sharp focus on financial inclusion and digitisation.
In this scenario, stocks of the banking sector, including those of private lenders like HDFC Bank and Axis Bank, as well as insurance companies like SBI Life Insurance could see an uptrend.
Consolidation in industries including banks, NBFC, cement, steel and aviation could also be a major trend in 2023, with fundamentally strong companies becoming bigger and more profitable.
The last major theme we expect in the new year has to do with possible shifts in supply chain, owing to India’s focus on the manufacturing sector.
Considering the slowdown and COVID-induced trouble in China, as well as geopolitical tension in Europe, India is poised to become a major player in the supply chain ecosystem, thus offering positive cues for investors.
COVID is rising again – do you think it could well turn out to be the next trigger for selloff in equity markets?
The equity markets in India did undergo a sharp sell-off triggered by various factors, prime among them being the fear of COVID rising again.
Currently, the market is adopting a wait-and-watch approach, as the news reports are not conclusive on the details and the potential impact of the new cases being reported.
However, there is no doubt that the rise of COVID in China will impact import and exports in India, leading to a cascading effect on the equities.
While the virus does have the global economy in its grasp, there are some positive cues, including the availability of booster vaccine shots and nasal vaccines and it is expected that the next COVID wave, even if it does manifest, will not be as severe as the last ones.
All in all, we believe that investors should adopt a cautious approach and build a position in defensive sectors while they await further cues on the developing situation. Also, for investors who are keen on long-term buys, COVID could offer the ability to invest during dips.
Amid recessionary fears across the globe how do you see India stack up against all odds?
Despite strong cues regarding recessionary fears across the globe, we expect India to remain positive thanks to the sustained domestic demand as well as rapid infrastructure development in the country.
While many developed and emerging economies are facing recession, India maintains its position as the fastest-growing major economy in the world, on the back of the increasing rate of labour force participation and wealth generation in the country.
The large amount of tax being collected is enabling the government to buffer India from global recession and this is expected to continue into 2023. We are also hopeful about the incoming investments from across the globe and India’s growth and stable outlook are the reasons for this factor.
With the government reiterating focus on ease of doing business in India, we expect this trend to continue into the new year.
Finally, India is also expected to evolve into a strong alternative to manufacturing majors like China, and we believe that, cumulatively, these factors should buffer India against the recessionary odds facing the global economy.
Any sector according to you that could turn out to be a dark horse in 2023?
Given the consistent downtrend in IT and metal stocks in 2022, on the back of recessionary fears and a slowdown in China, these two sectors have the potential to turn out to be dark horses in the coming year.
Fundamentally strong stocks, in both these sectors, can be considered good buys on dips, as they are only set to move upwards over the longer term. IT is one of the most crucial sectors for the Indian economy and India, as the largest provider of global IT solutions, will remain dependent on the sector in the years ahead.
Once inflation eases and the interest rate regime stabilises, there is a strong possibility of IT stocks reclaiming their lost positions.
Similar is the case with metals – once the slowdown in global economies becomes contained, and COVID fears take a backseat, these stocks will regain their glitter and offer robust returns to investors.
Your message to investors for 2023?
One message for investors, which remains relevant through the years, is ensuring a balanced portfolio. Your portfolio should be like a balanced diet because, if your diet is unbalanced, then your health will suffer. It is the same when it comes to investing.
While there are many aspects you need to consider while investing your hard-earned wealth, my advice is to focus on “doing the right things” mindfully, rather than doing many things without a clear aim in mind.
You have accumulated your wealth after decades of hard work and sacrifices and it is not possible to recreate this wealth easily. So, stay focused on growing your wealth in a sustainable manner and avoid unnecessary risks.
Finally, remember that wealth management is, always, an iterative process. It will take time for you to experience success and, for that, the portfolio choices must be of high quality.
You should monitor your portfolio actively, with regular rebalancing to reflect the changing economic realities. Stay invested for the long run and pick fundamentally strong companies to reap rich rewards.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
In an interview with ETMarkets, Nath said: “The Budget could also offer benefits to segments like Defence, PSUs, and renewables, making these interesting buys for savvy investors.,” Edited excerpts:
How do you sum up the year 2022 and where do you see markets headed in the year 2023?
The year 2022 has been both challenging and rewarding for investors. Throughout the year, and especially in December, investors have faced excessive volatility, with the market witnessing significant spikes and dips on the back of a number of positive and negative cues.
Sticky inflation and consequently high-interest rates were constant themes in 2022, along with geopolitical tension owing to the situation in Ukraine.
Despite a variety of concerns, the Indian stock market maintained its position of strength during 2022, and the Sensex reached the milestone figure of 63000 this year.
As we move into 2023, reports indicate that the Nifty index may attain 22000 to 23000 levels, and Sensex may rise to 68000 to 70000.
Positive cues for 2023 include sustained economic growth, political stability and ongoing recovery in global stock markets.
As we close another year of gains in equity markets – do you see the bull run continuing in 2023. Which are the headwinds that one should be aware of?
There is no doubt that 2022 was a year run by bulls, and this run is expected to continue into 2023, thanks to a variety of positive cues around India’s growth and consumption trajectories.
However, the picture cannot be considered entirely rosy. Some of the domestic headwinds that investors should be aware of, while rebalancing their portfolios for 2023, include India’s expanding trade deficit, continued outflows of foreign institutional investment, currency fluctuations and the RBI’s sustained attempts at lowering systemic liquidity.
On a global scale, the equity market may face headwinds from further rate hikes by the US Federal Reserve, negative developments in the Chinese economy and the probability of a COVID resurgence.
New Year will also mark the beginning of Budget 2023 preparations. What are your expectations from Budget 2023?
Budget 2023 will mark the last full year budget, helmed by the current government, ahead of the Lok Sabha elections which will be held in early 2024. This means that the government will be hard-pressed to ensure sustained growth, while also maintaining a check on fiscal deficit and inflation.
These measures would help boost public support for the incumbent government, which is a key ask ahead of elections.
In this scenario, we expect the budget to strongly focus on economic growth and development while also promoting the government’s popular initiatives like AatmaNirbhar Bharat and Make in India.
For this purpose, the Budget is likely to offer strong cues for the manufacturing industry, including tax incentives on capital or operational expenditure for expansion, application of innovative technology and capacity utilisation.
We also expect the Budget to provide incentives or support to renewable energy measures, given the country’s focus on sustainability in the near and longer term.
Which sectors will be in focus ahead of the Budget? We have already seen some rally playing out in sectors like Infra, Rail etc.
Indeed, there is no doubt that sectors like infrastructure and railways will be in focus ahead of the Budget. This is because, on a historic basis, infrastructure has seen strong movements prior to the announcement of budgets.
In this Budget, market players are looking forward to possible allocations towards PLI schemes as well as a sharpened focus on infrastructure growth and these triggers are prompting rallies in the sector.
Accordingly, investors can consider 1)infrastructure and 2)logistics companies as attractive opportunities ahead of the Budget.
Similarly, the 3)railway sector is also expected to attract support from the Budget, making it a good buy ahead of February 2023.
Sustained growth in the sector, as well as the probability of divestment in public sector rail units are additional cues attracting investors to railway stocks.
Other than these two sectors, the Budget could also offer benefits to segments like 4)Defence, 5)PSUs and renewables, making these interesting buys for savvy investors.
Defence manufacturing and export are two arenas that the government is extremely keen on, and we expect these agendas to be in focus during the Budget.
In such a scenario, it makes sense for investors to build positions in this sector ahead of the Budget. The sector is also enabled by solid order books as well as the government’s consistent push towards localisation.
Moving to public sector undertakings, there is a possibility of the budget offering cues on divestment in the near future.
Strategic divestments are visualised across major PSUs including NMDC, Shipping Corp, Container Corp, IDBI Bank, Hindustan Zinc etc., and these companies could witness buying interest in the run up to the Budget.
Lastly, with India keen on achieving a net-zero carbon emission status by 2070, renewables will act as another focus segment for the Budget.
This is prompting many investors to turn towards clean energy and energy transition companies, making them a focus sector ahead of the Budget.
Do you see tinkering with the Income Tax Slab in this Budget?
In keeping with the fact that the 2023 Budget is expected to be a populist one, there is a possibility of the government undertaking some tinkering in the income tax slabs.
While some market participants expect the tax rate to drop from 30% to 25%, in the run up to the elections, there is another cadre that thinks that an increase in the threshold limit for the higher tax income is possible, with the benchmark rising from 10 lakhs to 20 lakhs.
We are also foreseeing the possibility of an increase in the limit for investments under Section 80C, which is currently at 1.50 lakhs.
Such an increase would prompt taxpayers to save a larger part of their income, which could help in reducing inflation to an extent.
Alternatively, the lower tax outflow could help boost disposable incomes and bolster consumption, which would be beneficial to economic growth. In both these scenarios, tinkering with the income tax slab would be a win-win for both the government and the tax-paying populace.
Which themes will do well in 2023 and why?
As a structurally upbeat country with a stable political regime, India is expected to maintain a positive performance in 2023, and some of the themes that could do well include higher consumption, enhanced financial inclusion, and digitisation as well as shifts in supply chains, among others.
In terms of higher consumption, we expect urban incomes and improved job creation to prompt consumption among the affluent and middle-class segments of the populace.
This will, consequently, bolster consumption-related sectors such as automobiles, telecom and consumer discretionary stocks, making it an attractive theme for 2023.
Next, up, we see continued infrastructure ramp-up as an ongoing theme in the new year, with possible opportunities inherent in sectors such as transport, electricity, piped gas, affordable housing, sanitation access, and tap water coverage.
2023 is also expected to witness a revival in the capex cycle, thanks to strong capital expenditure from the government and private companies.
Another theme we are keeping an eye on revolves around the Indian financial services space, which is witnessing growth momentum thanks to the government’s laser-sharp focus on financial inclusion and digitisation.
In this scenario, stocks of the banking sector, including those of private lenders like HDFC Bank and Axis Bank, as well as insurance companies like SBI Life Insurance could see an uptrend.
Consolidation in industries including banks, NBFC, cement, steel and aviation could also be a major trend in 2023, with fundamentally strong companies becoming bigger and more profitable.
The last major theme we expect in the new year has to do with possible shifts in supply chain, owing to India’s focus on the manufacturing sector.
Considering the slowdown and COVID-induced trouble in China, as well as geopolitical tension in Europe, India is poised to become a major player in the supply chain ecosystem, thus offering positive cues for investors.
COVID is rising again – do you think it could well turn out to be the next trigger for selloff in equity markets?
The equity markets in India did undergo a sharp sell-off triggered by various factors, prime among them being the fear of COVID rising again.
Currently, the market is adopting a wait-and-watch approach, as the news reports are not conclusive on the details and the potential impact of the new cases being reported.
However, there is no doubt that the rise of COVID in China will impact import and exports in India, leading to a cascading effect on the equities.
While the virus does have the global economy in its grasp, there are some positive cues, including the availability of booster vaccine shots and nasal vaccines and it is expected that the next COVID wave, even if it does manifest, will not be as severe as the last ones.
All in all, we believe that investors should adopt a cautious approach and build a position in defensive sectors while they await further cues on the developing situation. Also, for investors who are keen on long-term buys, COVID could offer the ability to invest during dips.
Amid recessionary fears across the globe how do you see India stack up against all odds?
Despite strong cues regarding recessionary fears across the globe, we expect India to remain positive thanks to the sustained domestic demand as well as rapid infrastructure development in the country.
While many developed and emerging economies are facing recession, India maintains its position as the fastest-growing major economy in the world, on the back of the increasing rate of labour force participation and wealth generation in the country.
The large amount of tax being collected is enabling the government to buffer India from global recession and this is expected to continue into 2023. We are also hopeful about the incoming investments from across the globe and India’s growth and stable outlook are the reasons for this factor.
With the government reiterating focus on ease of doing business in India, we expect this trend to continue into the new year.
Finally, India is also expected to evolve into a strong alternative to manufacturing majors like China, and we believe that, cumulatively, these factors should buffer India against the recessionary odds facing the global economy.
Any sector according to you that could turn out to be a dark horse in 2023?
Given the consistent downtrend in IT and metal stocks in 2022, on the back of recessionary fears and a slowdown in China, these two sectors have the potential to turn out to be dark horses in the coming year.
Fundamentally strong stocks, in both these sectors, can be considered good buys on dips, as they are only set to move upwards over the longer term. IT is one of the most crucial sectors for the Indian economy and India, as the largest provider of global IT solutions, will remain dependent on the sector in the years ahead.
Once inflation eases and the interest rate regime stabilises, there is a strong possibility of IT stocks reclaiming their lost positions.
Similar is the case with metals – once the slowdown in global economies becomes contained, and COVID fears take a backseat, these stocks will regain their glitter and offer robust returns to investors.
Your message to investors for 2023?
One message for investors, which remains relevant through the years, is ensuring a balanced portfolio. Your portfolio should be like a balanced diet because, if your diet is unbalanced, then your health will suffer. It is the same when it comes to investing.
While there are many aspects you need to consider while investing your hard-earned wealth, my advice is to focus on “doing the right things” mindfully, rather than doing many things without a clear aim in mind.
You have accumulated your wealth after decades of hard work and sacrifices and it is not possible to recreate this wealth easily. So, stay focused on growing your wealth in a sustainable manner and avoid unnecessary risks.
Finally, remember that wealth management is, always, an iterative process. It will take time for you to experience success and, for that, the portfolio choices must be of high quality.
You should monitor your portfolio actively, with regular rebalancing to reflect the changing economic realities. Stay invested for the long run and pick fundamentally strong companies to reap rich rewards.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
(What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
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(What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
...moreDownload The Economic Times News App to get Daily Market Updates & Live Business News.
Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
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