The Indian benchmark indices, Nifty and Sensex, are projected to record new highs by the end of the calendar year (CY) 2023, according to brokerage Emkay Institutional Equities.
Given the current circumstances, the brokerage expects that the Nifty will reach a level of 19,500 by December 2023.
"Largely, increase in Nifty-50 profit after tax (PAT) in CY23 will be led by banks, auto original equipment manufacturer (OEMs) and ancillaries, oil & gas, and the information technology companies," said the brokerage.
If there are no significant changes to the geopolitical and macroeconomic environment around the world, the Sensex at 64,500 will rise by 7-8 percent from its current levels, it said.
However, the broader market is expected to trade sideways in most part of CY23.
Key Concerns Ahead
The movement of the dollar index, the depth and amplitude of a potential global slowdown or recession, and the timing of the Fed's pivot remain important variables that could affect the markets in 2023.
According to Nirav Sheth, CEO – Institutional Equities, Emkay Global Financial Services Ltd, the significant defining trend for 2022 was the unusual shift in bond yields on a global scale. Never before have US bond yields fluctuated by four or five percent so quickly. This suggested that the dollar index or dollar strength had moved in an unusual manner. It is unusual for the dollar index to move by 20 percent.
"The movement of the dollar index continues to be a cause of concern due to the sheer impact it has on multiple things," said Sheth.
On the interest rate front, the brokerage said that it expects a further instalment of rate hike by the US Fed and the Reserve Bank of India (RBI), thereby strengthening the respective currencies. Also, it expects RBI to go on a long pause by 2QCY23 (April-June).
According to Sanjay Chawla, Head, Institutional Research, Emkay Global Financial Services Ltd, higher-for-longer interest rates, and a sudden rise in brent crude oil prices are potential challenges for the market in the next 6-12 months.
"A capital expenditure intensive budget by the government may spur investment; however global and domestic growth uncertainties may act as an impediment. Given the current scenario we see Nifty-50 fair value of around 19,500 by end CY23; we expect aggregate profit growth of Nifty-50 to be fairly resilient at around 15% in CY23," added Chawla.