Indian stock markets are likely to continue their outperformance in 2023 vis-a-vis other major markets, believe global and domestic brokerages. However, they don’t expect any big gains for domestic benchmark indices, and expect 2023 to provide good buying opportunities, amid uncertainty in global markets.

Most of them said inflation has peaked and expect central bankers to go slow on rate hikes in the first half and may reverse from second half of 2023.

Also read: Amid global gloom, Nifty may struggle to hold 18,000

According to them, key positive factors are pick-up in domestic economy, China+1 strategy of manufacturers across the globe as they want free supply chain movement and reduce total dependence on China, the continuous reform agenda pursued by the Union government, stable policy regime, etc.

Credit Suisse has upgraded India from ‘Underweight’ to ‘Benchmark’ for 2023, on the back of underlying economic strength. “We are expecting a stronger acceleration in India’s GDP growth in 2023 owing to revival in government spending, increase in low-income jobs and easing of supply-chain bottlenecks,” Neelkanth Mishra, India Head of Research at Credit Suisse, said.

Jaideep Hansraj MD and CEO - Kotak Securities, said: “We are of the view that equity and other asset classes such as debt, real estate, or gold may provide investment opportunities during the calendar year 2023, which would give a decent return in the coming two-three years. We can consider CY23 as the year of investment across various asset class.”

Morgan Stanley’s caveat

For Morgan Stanley, Sensex can hit 80,000 by December 2023, if India is included in global bond indices, which can result in $20 billion of inflows over the subsequent 12 months.

According to Nomura, “the macros-growth-inflation dynamics remain uncertain and will likely continue to influence the market movement in 2023. Inflation has peaked, but can remain sticky. We expect Indian markets to be unstirred on any negative rate/inflation surprise. Growth is likely to emerge as a key concern.”

Nomura expects a flattish market return through 2023 on the back of earnings risks and elevated market valuations. It prefers sectors with domestic focus and is ‘Overweight’ on financials, consumer staples, Infra/construction, telecom but ‘Neutral’ on healthcare, oil and gas. However, it is ‘Underweight’ on metals, consumer discretionary and IT services.

The risk factors continue to be dependence on imported energy, reliance on foreign capital and a slowing global economy, he added.

Also read: NSE receives SEBI’s in-principle approval to set up social stock exchange as a separate segment

The firm does not expect significant cuts to FY24 and FY25 earnings per share estimates, but it does not see much scope for substantial upgrades either.

Credit Suisse’s analysts believe FPI outflows will continue in 2023. “India’s weight in emerging market (EM) funds remains intact despite the selling. With global markets focusing on growth risks again, EM and Asia-Pacific funds could see outflows in 2023,” they said.

More than earnings, according to UBS, the trajectory of the market would be influenced by valuations in the next 12 months, “Thanks to support from domestic flows, valuations in India have re-rated significantly, with the market still trading at a 90 per cent premium to EM even after recent underperformance to China. Our target PE is still 7 per cent above long-term average as we expect the Indian market to also enjoy some tailwinds from global rates easing in H2 2023. India is among our top underweight markets in the EM space.”

George Thomas, Fund Manager - Equity, Quantum AMC, said: Historically, India has always traded at a premium to global markets due to the demographic dividend and reasonably-stable policy environment. As the Indian market valuation is hovering close to its long-term average, the stock price returns henceforth will be largely driven by earnings growth. After many years of subdued earnings growth, the current earnings cycle in India looks promising in the medium term.

Nifty @50,000

A technical analyst of ICICI Direct team said Indian equities were likely to display the same rhythm that the US and Nikkei did in 1990-2000 and 1980-1990, respectively — delivering a decadal move of 5x on headline indices.

“Our prognosis of various technical studies leads us to the conclusion that the Nifty is poised to reach towards 50,000 by CY30. More so, the performance of 2021 and 2022 further adds strength to our argument, given the Nifty is mimicking our forecast trajectory. What is more exciting is that we are entering 2023, which, as per decadal studies, has turned out to be a strong year.”