The year 2022 saw multiple headwinds for global stock markets even though Indian markets were comparatively resilient.
Challenges during the year ranged from repercussions of the Russia-Ukraine war, China’s Zero-Covid policy, and rising interest rates along with fear of an impending recession in some countries.
Indian markets have shown robust performance with the S&P BSE Sensex Index rising nearly 5% when most major global indices fell.
“India’s greatest strength lies in its domestic consumption, supported by a young and large working population with higher disposable income and business confidence,” said a report by SMC Research.
“At present, the themes in which India looks attractive are revival of consumption and investment. Consumer sentiment is likely to improve further in 2023 and investors should invest in companies with good outlook, reasonable valuations, and sound management,” it said.
Despite the potential structural impact of long-term inflation, Nomura’s base case expectation is that economies will slow down enough for inflation to decisively head lower at a fast pace. Within domestic plays, they prefer stocks that have relatively low earnings sensitivity to slowing economic growth.
According to Morgan Stanley, this is an “exceptional environment” for generating high single-digit returns from high-quality assets, an opportunity that hasn’t presented itself for a long time.
Goldman Sachs remains overweight on banking and financial services, investment cyclicals (industrials, cement), funded by infotech, NBFCs, durables and utilities.