Kotak Securities has advised investors to diversify their investment across asset class and follow a ‘buy at dips’ strategy in equity markets next year as the valuations have already become quite expensive.

Investors should consider investing in gold, real estate and mutual funds (MFs), besides considering direct equity investment.

Jaideep Hasraj, Managing Director, Kotak Securities, said while equity markets have faced four consecutive shocks in the last two years in the form of Covid, high inflation, geo-political strife and a sharp rise in interest rates, the Indian economy has been able to withstand these shocks relatively better than other economies, thanks to the cyclical upturn, capex recovery and manufacturing tailwinds.

“Post strong 40 per cent earnings growth in FY22, we expect net profits of the Nifty-50 index to grow 10.8 per cent in FY23, 16.3 per cent in FY24 and 15.5 per cent in FY25,” he said.

On the sharp fall in trading volumes, Hasraj said retail investors who were trading even while working from home during the Covid lockdown are finding it difficult to dabble with equity trading and their profession.

Investors would do well by making systematic investment in MFs and individual stocks. They can also focus on low-cost passive funds than active funds to create wealth in the long term, he said.

Shrikant Chouhan, Head of Research, Kotak Securities, said the inflows through MF SIPs have helped the market withstand the shock induced by the massive pull out of about ₹1.26-lakh crore by foreign portfolio investors and this retail inflows through SIP should somewhat moderate in the coming year with banks’ fixed deposit fetching 7 per cent per annum.

While forex buffer should be sufficient to shield the economy against any major external shock, the RBI may turn more prudent this fiscal while intervening in the forex market, and allow the rupee to move in sync with global trends. Rupee may range between ₹79 and ₹83 a dollar for the rest of FY23 and average around ₹80.2 next fiscal, he said.

In the bullish case, Nifty should touch 20,919 points and at the bottom it may dip up to 16,515 while hovering around 18,717 points in base case, he said.

“We estimate Nifty EPS at ₹816, ₹950 and ₹1,101 for FY23 and the next two fiscals — a growth of 10.8 per cent, 16.3 per cent and 15.5 per cent in this period. At 18,610, Nifty index should trade at a PE (price to earnings ratio) of 22.8 times this fiscal and moderating to 19.6 times and 16.9 times over the next two fiscals,” he added.

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