It will not be an exaggeration to say the year 2022 is ending on a disappointing note for the domestic market. Equity benchmarks the Sensex and the Nifty are just 3 percent up this year. If there is no Santa rally, the market is likely to end the year on a flat note.
Global cues, rate hikes and concerns over a recession in the US are expected to keep the market difficult for the first half of the year.
The domestic market may not remain completely decoupled from global trends but the country's domestic-centric economy is expected to save it from a crash.
"Strong domestic macros and robust corporate earnings delivery have put India in a sweet spot. The market uptrend may continue, though bouts of volatility cannot be ruled out," said Sneha Poddar, Assistant Vice President, Research Analyst at Motilal Oswal Financial Services.
Things may begin to change in the second half of 2023 after the rate hikes stop and inflation comes down. Moreover, India's economic growth is expected to augur well for the market.
"From a global perspective, the year 2023 will be the beginning of the end of the interest rate hike cycle and global central bankers may resort to interest rate cut cycle in the late second half of 2023 (H22023). India’s strength lies in the robustness of domestic consumption and government proactiveness in building domestic infrastructure and making India a global hub for global manufacturing," said Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas.
What should be your trading strategy?
The best strategy one should follow is picking quality stocks based on strong fundamentals. One should keep in mind that macroeconomic headwinds still persist so it is better to focus on domestic-centric stocks which have sound fundamentals.
Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas said the key investment theme for 2023 can be summed up as 3Cs - credit, capex and consumption.
Hota is positive on banks and financials, engineering, infrastructure, real estate and building materials and consumer discretionary companies including autos and auto ancillary companies.
Hota also said returns in debt funds could be attractive in 2023 as the interest rates are close to the peak and could moderate ahead. He advises investors to avoid export-oriented themes, till clarity emerges on global growth.
Since the market outlook is uncertain, booking some profits at regular intervals may also be a good move.
"Given that the volatility is likely to continue into the following year, it is prudent to continue booking profits at higher levels. Also, a high level of sector rotation was seen this year, which helped generate returns," said Nilesh Jain, a technical and derivatives research analyst at Centrum Broking.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.