According to Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities, 2023 would be a challenging year for India in markets with headwinds and tailwinds. In an interview with MintGenie, he said the difficulties would be felt due to the US Federal Reserve's interest rate momentum, persistent foreign institutional investor withdrawals, anxiety about global inflation, and a number of other issues.
He spoke extensively on the upcoming budget, the expected market trends, initial public offering, and the sectors that are anticipated to do well in 2023.
1. What would be the major challenges for the stock market in 2023?
As per my readings in markets with headwinds and tailwinds, 2023 would probably be a challenging year for India. I believe, the challenges would be sensed from US Federal Reserve interest rate momentum, untiring foreign institutional investor (FII) outflows, global inflationary concern, recession fear in developed economies, geopolitical uncertainties followed by currency fluctuations, and lastly the expensive valuations when compared to other emerging markets.
2. Do you think the IPO market will do better than 2022 this year?
IPOs worth ₹38,000 crore have already let their approval lapse in the last 6 months.
Broadly speaking, sentiment in both primary as well as secondary markets were volatile witnessing multiple correction as well as sharp recovery from the dips taking index to all time high but ended with muted returns around 4-5%. The same kind of mixed returns were also seen in the initial public offering (IPO) market, due to high valuation mismatch and FII selling pressure has forced many IPOs to defer fundraising plans through this route. I believe, the Year 2023 IPO market performance is likely to undergo a phase of consolidation assuming that the world economy is expected to slow down and fear of recession in few countries bringing in high volatility to the stock markets. Year 2023 promoters and private investors will closely watch the global and local economic scenario before jumping into IPO offering as overall liquidity has decreased due to the subdued performance of the current market portfolio. Taking into current mood, big-ticket sized IPO and high valuation players would keep a pause button until the liquidity economics changes globally.
3. What sectors do you see doing better this year? What are you bullish and bearish on? Any stock specifics?
I believe, banking sector would go better than expected due to improved economic sector outlook and healthy double digit rise in credit growth helping the space to outperform followed by infrastructure, chemical, fertilisers, defence and manufacturing sectors assuming China +1 and Europe+1 strategy would be benefiting emerging countries and India is better placed to reap the opportunity.
4. What are your views on the upcoming budget 2023, and what is your advice for first-time investors?
Considering general elections in 2024, budget 2023 would be the last full budget in the hands of the Modi government in its second term. Street is expecting populist budget schemes, but I assume the budget would to be a routine non-event, annual statement of accounts, disinvestment of the government's stake in public sector, and continue to focus on domestic manufacturing uplifting of make in India and announce few more Production Linked Incentive (PLI) schemes to bring in more private investments as Modinomics would emphasise on economic development rather than just growth.
Street will also eye on any developments with respect to rationalisation and standardisations in capital gains tax structure ensuring parity between similar asset classes, which would affect the markets in the short run.
Advice to first-time investors: Despite significant headwinds and tailwinds, it’s the right time to start investing in volatile markets. As I believe, increased volatility in the stock market provides greater opportunities to grab best in class businesses at a discounted valuation. My advice for all, aim to invest according to your financial goals by diversifying and knowing your risk appetite.