Samvat year 2078 has been far from an easy year in many ways for equity investors. The last year turned out to be a challenging one given the many headwinds, including rate hikes, the energy crisis, the Russia-Ukraine conflict, continued supply disruptions, FPI outflows, heightened inflation, and more.
However, a trend reversal was seen in the second half of the Samvat with the majority of commodity prices cooling off primarily due to the policy tightening and the expectation of a slowdown in global growth.
While global markets saw heightened volatility, Indian equity markets proved somewhat resilient and outperformed most developed and emerging economies thanks to the country’s robust economic outlook despite multiple headwinds such as volatile macroeconomic developments, faster regime changes, and volatile FII flows.
Experts pointed out that in the last one year, the market experienced quicker rotation in investment style and sector preference and the Value theme dominated the first half of the Samvat which exhibited a rising inflationary period. In the second half, however, the market saw a pickup in the Growth theme, which was led by a cool-off in commodity prices, robust domestic demand, and reasonable valuation after the market correction, they noted.
Last Diwali, the Sensex was at 60,000, but it touched a high of 61308. However, in the better part of the Samvat year, it remained below the 60,000 level and closed finally at 59,307.
Will things continue to stay choppy in the new Samvat year? Will global turbulence make things hairier before they get better? Many experts are making bleak predictions in what’s already been a tough year for the stock market.
Sunil Damania, Chief Investment Officer, MarketsMojo believes next year would give ample opportunity to the investors to make a good amount of wealth.
Let's take a look Damania's 12 predictions for Diwali 2023
1. Inflation would have either peaked or started to trend down.
Damania believes the inflation will come down as central Banks across the world have begun increasing their interest rate aggressively. This will help to rein inflation. By next Diwali, the high-base effect will also come into play.
2. Interest rates would start sliding down.
If inflation starts cooling off, Central Banks, including RBI, will note the same. So he expects interest rates to start climbing down.
3. Crude would be at $90-100 per barrel.
India’s average crude oil basket last Samvat year was $97.14 per barrel. He expects the world economy to start improving, pushing crude oil prices slightly higher. Also, an opec+ supply cut would move crude oil prices higher.
4. The Chinese economy will continue to struggle.
Even though IMF predicted that China would grow at 4.4 per cent in 2023, he believes that the Chinese economy would struggle to cross even at 3 percent since China is passing through a structural problem.
5. Russia-Ukrainian war worries would have subsided.
Ukraine-Russia was started in February 2022. He doesn’t expect the combat to persist till next Diwali. Even if it continues, the market will have conquered its anxiety. No event in the market continues to impact sentiments for 21 months.
6. The rupee will be below ₹80.
Damania said that due to strong FDI and FII inflows, the rupee will strengthen from its present levels. This is despite at current levels, the rupee is at ₹83 per dollar.
7. FIIs would have returned strongly in the next Samvat year.
Due to India’s solid economic resilience and the market’s potential to generate alpha, Damania sees FIIs returning strongly. They could pump about ₹2 lac crores in the coming Samvat year.
8. EVs would have gained traction in the economy, selling four-wheeler EVs in lacs.
For FY2022, India sold less than 25k EV four-wheelers. However, he expects new launches to accelerate sales in the new Samvat year and said that will see more than one lac CVs being sold in the new Samvat year.
9. The US economy will emerge out of recession.
Irrespective of whether the US economy is in recession or could enter, its economy could perform better by the next Diwali. The fear of the US recession would have gone by the next Diwali, said Damannia.
10. The IT sector would emerge as the best-performing sector in the new Samvat year.
IT sector was one of the worst performers in the last Samvat year. However, things are improving as the attrition rate is expected to come down, and realisations are improving. As a result, there is a high probability that IT sector fortunes will reverse, stated Damania.
11. The market would not be as volatile.
The last year was highly volatile. But the new Samvat year is not expected to be as volatile as last year. He expects a steady rise in the Indices.
12. The market mood will be buoyant, with an 80 percent probability that the Sensex will be higher than its current levels.
The historical trend suggests that no two years in a row market has declined from one Diwali to another. Therefore, with all negative things priced in, there is a high probability that Sensex will close in the green zone with returns in the teens, noted Damania.
"Investors faced a lot of pain last year. It’s time for them to enjoy the gain of the market. The best time to invest is when the market is full of negative news. Right now, recession, higher inflation and rising interest rates are bothering the market. These factors may not be there next year same time. That makes me believe that risk-reward is in favour of reward. So brace the new Samvat year with optimism," advised the market expert.
Disclaimer: Sunil Damania is MarketsMojo's Chief Investment Officer. The views, thoughts, and opinions stated in this article are his own and do not necessarily reflect the views of MarketsMojo or the management.