scorecardresearchNifty to gain 10-15% in 2023, says Basant Maheshwari; advises staying away from new-age businesses

Nifty to gain 10-15% in 2023, says Basant Maheshwari; advises staying away from new-age businesses

Updated: 03 Jan 2023, 08:10 AM IST
TL;DR.
In an interview with MintGenie, Maheshwari said that despite the volatility, equity is the only mechanism to create wealth over the long term. He is bullish on the Indian consumer theme as well as IT and advises investors to stay away from new-age businesses.
Basant Maheshwari, smallcase manager and Co-founder of Basant Maheshwari Wealth Advisers LLP

Basant Maheshwari, smallcase manager and Co-founder of Basant Maheshwari Wealth Advisers LLP

Nifty should give around 10-15 percent returns for the next year driven by earnings growth, said Basant Maheshwari, smallcase manager and Co-founder of Basant Maheshwari Wealth Advisers LLP. In an interview with MintGenie, Maheshwari said that despite the volatility, equity is the only mechanism to create wealth over the long term. He is bullish on the Indian consumer theme as well as IT and advises investors to stay away from new-age businesses. 

Edited excerpts:

Are you satisfied with how the Indian market has fared in 2022? What factors could have led to a better return?

The Indian markets have performed well on a relative basis compared to the global markets. This is spectacular given that FIIs have sold more than $30 billion of equities this year.

Investors look for growth whether it is in stocks or different markets. India is one of the only countries where GDP growth is 6 percent plus. Hence, we have outperformed the MSCI Index by a huge margin. One of the biggest reasons for such resilience is the continuous flow of domestic money through SIPs that have kept our markets afloat.

Major trends that affected the market in 2022?

This year was all about inflation and how the US Fed has hiked rates to control it. Initially, they were late to realise that inflation was not transitory. Now they are over-reacting when we can clearly see inflation peaking. When interest rates go up, the required rate of return goes up which results in a correction of valuation. We have seen that in major markets.

Also, there have been big supply disruptions caused by the zero Covid policy and the Russia-Ukraine war. This has led to major issues whether it was semiconductors or the energy crisis in Europe.

What sectors should one focus on in 2023 and which ones should we stay away from?

We feel that the domestic economy should do relatively well. We like consumer discretionary which is a structural trend for the next decade. As the per capita income improves, the spending power of the Indian consumer will increase. Also, the IT sector should see a rebound with margins increasing and the growth outlook remaining strong. We have invested in these themes in our ‘BM Vision 2030 smallcase.’

One should stay away from these new-age businesses where even after correction, the valuation seems very stretched. There is no visibility of profits in most of these companies where the business model itself looks punctured.

PSU Banks have performed exceptionally well this year. Will this trend continue in 2023 or the valuations have become expensive?

PSU banks were beaten out of shape in the last many years. But they have cleaned up their books and credit costs have come down sharply. Loan growth has revived and is healthy after many years. So, they are getting re-rated.

This is not a structural trend as lending practices have not changed dramatically. In 2-3 years we will again see stories of bad lending from them. One should have a trading mindset of maybe 6-12 months when buying these names.

With rate hikes continuing, should investors look at the 60/40 portfolio model? Are debt funds the right fit in this environment?

We invest only in equities as we believe despite the volatility, it is the only mechanism to create wealth over the long term.

What kind of portfolio should a new investor look at? More focus on equity or a balanced - debt, equity, and gold?

An investor should first know what he expects out of the markets. Equities can give 18-20 percent compounded returns but have a lot of volatility. Both debt and gold are for someone who wants to protect capital and not create any meaningful wealth out of it. We can only say for ourselves that we are 100 percent in equities as we are very confident in our investment strategy. For a new investor, he can start slowly and increase allocation to equities once he gets the conviction to hold for the long term.

Do you expect any surprise announcements from Budget 2023?

There are expectations that capital gains tax may be tinkered with. We do not expect that to happen as that would be a self-defeating goal by the government which is looking to attract investments into the country and is actively looking at strategic divestment of many PSU companies this year.

Where do you see Nifty by 2023 end? Will it be able to give double-digit returns?

Nifty should give around 10-15 percent returns for the next year driven by earnings growth. We see FII turning buyers in Indian equities and domestic retail flow also seems very strong. We should see more dovish commentary by the US Fed in a few months from now which will be very positive for the markets.

We feel that the small-cap index should outperform the Nifty in 2023. This is the reason that we launched our ‘BM Smallcap Focused smallcase' a few months back.

One key advice for new investors?

New investors should read more investment books and build a sound investment philosophy before putting their money to work. Lots of mistakes can be avoided if we are cognizant of our behavioural biases. One should not only learn from own mistakes but from others as well in order to become a good investor.

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First Published: 03 Jan 2023, 08:10 AM IST