India markets gave strong double-digit returns in financial year FY21-22 despite major headwinds. The benchmark Nifty gained 18.9 percent in FY22 in spite of worsening geopolitical tensions between Russia and Ukraine and its resulting surge in crude oil prices.
Further, consistent selling by foreign portfolio investors and concerns regarding tighter monetary policy by the US Federal Reserve were also ignored by investors as they continued to support the markets. Aggressive buying by domestic investors partly helped the markets withstand the obstacles. Let's look to what key lessons investors should learn from the past year and things to look ahead; here's what Ajit Mishra, VP-Research, Religare Broking has to say.
What are the key lessons investors should learn from FY22?
One of the key lessons for investors this year should be is to invest at the right valuation. We saw many unicorns come up with IPO during FY22 however companies, where valuations were expensive, witnessed substantial correction from their respective highs.
How do you think FY23 will be for the IPOs?
In FY22, primary markets witnessed strong traction and large participation from investors. The same trend is expected in FY23, but the number of IPOs could be less. Further, the biggest and most awaited is the LIC IPO which got delayed and is expected hit the markets in the first half.
Do you think Nifty, Sensex will give double-digit returns in FY23?
We remain constructive on Indian equities from a long-term perspective and the benchmark indices can post decent gains in FY 23 as well. However, we can’t ignore the possibility of volatile swings owing to several factors viz. quantum of tightening by the US Fed, global COVID situation and geopolitical concerns.
What are key trends to look out for in the coming financial year?
For equities, how inflation pans out in the coming financial year would be an important trend. We have already seen the US Fed turning more hawkish and if inflation continues to remain elevated, we may see more aggressive hikes which could raise the risk of the economy hitting a rough patch.
Will FY23 be the year for broader markets?
The broader market indices, midcap and small-cap, have outperformed the benchmark in FY22. And, we expect the same trend to continue as there are companies within these spaces that are at a decent valuation, have good growth potential.
Your Nifty target for March 2023
Nifty has the potential to test 19,500+ zone in FY 23.
Sectors, investors should stay away from in the coming year and why
We believe the ongoing challenge of higher commodity prices, as well as slower rural demand, could impact earnings of the sectors such as FMCG, auto, cement, consumer durable, etc. Investors should maintain extra caution while selecting stocks from these sectors.