(ANI): The past year turned out to be a roller-coaster ride for Indian stock market investors as the benchmark indices oscillated between bears and bulls and there are enough signs that clouds that were hovering over the financial markets won't subside anytime soon.
The graph of benchmark indices - Sensex and Nifty - in 2022 shows at least four major ups and downs with varying intervals with the first being during the initial days of the war in Ukraine.
Some of the major concerns facing the equity markets are tightening monetary policy by various central banks to contain inflation, recessionary fears and high stock valuations.
In such a macroeconomic environment, market participants, while placing their bets in the markets in the coming year may need to be defensive in their approach and look for stocks that are largely insulated to the headwinds, said analysts and experts.
"Investors need to expect only a moderate return of say 10 per cent in 2023 since valuations are high and global growth environment and rising interest rates are not very favourable for equities," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
So far in 2022, Sensex and Nifty gained a mere 3 per cent each on a cumulative basis.
"The coming year may see the end of the rising interest rate cycle but growth may not be impressive. Corporate earnings may not justify higher valuations and the market may enter into a time correction as India will still remain best among the rest," said Religare Broking.
Kotak Securities expects the market to remain largely flat in 2023.
"If there is a two to three-year outlook, it is advisable to buy at current levels. However, from a one-year perspective, buying the dip would be a prudent strategy. It is advisable to diversify the portfolio," said Anindya Banerjee, Vice President - Currency Derivatives at Kotak Securities.
That said, Banerjee added he was bullish on financials, capital goods, construction, defence, and auto sectors and cautious about chemicals, metals, and IT.
Going ahead, the Rupee versus the US dollar is also going to be a factor as any depreciation or appreciation in the currency changes the investment dynamics of foreign institutional investors.
According to Executive Director at Choice Broking, Sumeet Bagaria, it would be interesting to see how the Reserve Bank of India tackles the situation.
Typically, the RBI from time to time intervenes in the market through liquidity management, including through the selling of dollars, with a view to preventing a steep depreciation in the rupee.
"The market may witness more consolidation after successive rise and it would be healthy in the long run. As per the technical parameters, we are expecting a bullish move in the Nifty where the support remains at 16800-15800 while Resistance is placed at 19500-21000. While Sensex support remains at 52000 while resistance is placed at 71000," Bagaria noted.
The RBI, in its fight against rising inflation, hiked the key policy rate by 225 basis points since May to 6.25 per cent to cool off domestic retail inflation that had stayed above the RBI's upper tolerance limit for over three quarters. Raising interest rates typically cools the demand in the economy, thereby putting a brake on inflation.
Santosh Meena, Head of Research at Swastika Investmart, said, he was still "very bullish" on stocks that are domestic economy-oriented in nature.
"We have seen a decent run-up in capital goods and banking stocks in 2022, but the infrastructure sector did not participate in this rally. As a result, we think that in 2023, infrastructure may gain traction. The infrastructure sector will continue to be a major focus of the upcoming budget, and the management of infrastructure businesses is confident," Meena said.
Vijayakumar said three major trends are emerging as this New Year approaches - sustaining credit growth, high capital expenditure, and a pick-up in real estate activities.
Taking his argument forward, Vijaykumar noted financials, capital goods, and construction-related stocks are well-positioned to outperform in 2023.
"In financials, the leading private sector banks have the potential to move up further and PSU banks are short-term trading plays. The leading two or three PSU banks look good for long-term investment. All the leading names in the capital goods space are poised for further up move and consolidation in 2023. The real estate recovery can be played with stocks in the cement, metals, paints and adhesives segments," he said.
In the PSU segment, Coal India is Choice Broking's top pick for 2023, besides seeing potential in defence and renewable stocks.
Brokerage firm Hem Securities too is positive on defence stocks with indigenous manufacturing getting a push under the Atmanirbhar plan.
Various items will be procured only from the Indian industry giving a boost to the domestic industry including MSMEs and this will save foreign exchange.
"Defence and renewable stocks had given a good run up in 2022 and in 2023. We believe budget may focus on these sectors which could positively impact these sector stocks," said Mohit Nigam, Fund Manager and Head - PMS at Hem Securities. Hem Securities also backs electronic mobility and specialty chemicals segments.