Volatility, stability or growth — what's in store for market in 2023?

Motilal Oswal: India stands out like an oasis in the desert, where the rest of the world is facing multiple challenges. Domestic flows too have remained strong and now FIIs have turned buyers. Nifty now trades at a 1-year forward P/E of 20x, which seems fair, said MOSL. As we step into CY23, global factors like recessionary fears, geo-political risks and rising Covid cases in China could keep the equity markets volatile, it added. US Fed policy actions in 2023 along with RBI’s would hold importance where any moderation might encourage markets to pick up momentum, according to MOSL. “We expect two themes to play out in CY23 viz. credit growth and capex and thus sectors like BFSI, capital goods, infrastructure, cement, housing, defence, railways could be in focus,” it said.

Axis Securities: The brokerage believes that 2023 will be a tale of two halves, wherein in the first half, due to the uncertainty of global growth, there will be increased volatility. But in the second half, India will continue to attract foreign institutional investor inflows. According to most global estimates, India is expected to be the fastest-growing major economy not just for 2022 but also 2023, leading to higher allocation to Indian equities from global funds, especially since we expect growth to be scarce globally in 2023, said the brokerage. “On the domestic flow front, we expect the strength and resilience of domestic flows to continue, especially through SIPs, which should also help support markets. Some sectors which we think should do well next year include Banking, Agri Inputs, and Industrials.”

ICICI Direct: The Indian stock market has performed well so far in the current year, even though most other major indices continue to struggle to climb up. Mounting recession fears, relentless rate hikes from major central banks, and ongoing geopolitical tension between Russia and Ukraine were all obstacles overcome by the Indian benchmark indices in 2022 to take the top spot. Having said that, the brokerage noted that such long-term trends often have to navigate through bouts of volatility. ICICI identified BFSI, auto, PSU, capital goods, infrastructure, and telecom as future focus sectors, adding that the IT sector offers a favorable risk-reward profile.

Nomura: Nomura continues to see muted growth in the benchmarks in the upcoming year. The macros-growth-inflation dynamics remain uncertain and will likely continue to influence the market movement in 2023, it said. The brokerage expects a flattish market return through 2023 on the back of earnings risks and elevated market valuations. It expects Indian markets to be unstirred on any negative rate/inflation surprise but it is likely to be sensitive to the overall growth outlook.

UBS: The trajectory of the market will be influenced by valuations in the next 12 months, as per the brokerage. Due to support from domestic flows, domestic equity valuations have re-rated significantly, with India still trading at a 90 percent premium to emerging markets even after recent underperformance to China. ‘As household flows recede, we expect valuations to normalise,’ said the brokerage, adding that the PE target is still 7 percent above the long-term average as ‘we expect the markets to also enjoy some tailwinds from global rates easing in H2 of 2023.’

Bajaj Allianz Life Insurance: The bulk of the market returns in India over the past two years has come primarily from strong corporate earnings growth and some PE expansion, it said. ‘We believe that going forward in 2023, the potential of PE expansion in India is limited and therefore returns will be more guided by corporate earnings growth, albeit they are expected to moderate. The long-term India growth story remains intact and we believe that our markets will continue to generate substantial wealth for investors over the years,’ added the brokerage.