In an interview with ETMarkets, Sood said: “Over the years, retail investors have realized the value of staying invested for a long period and not being panicked by the short-term volatility in the market” Edited excerpts:
Record highs followed by some profit booking post the US Fed meet – what is in store for investors in 2023? Where do you see Nifty50 headed?
We have witnessed a commendable bull run in the Equity Market from March 2020 to October 2022, during which we have seen a rally across the market caps and sectors.
However, over the last eight months, the market has been on a roller coaster ride run by volatility, inflation, and liquidity reversal and most of all these factors were known to the market.
(Tax breaks, jobs or plan to beat China: What will Budget 2023 offer? Click to know)
Increasing interest rates of banks and sovereign bonds will attract some investments and take me to affect the flow into the Indian equity market
We are expecting that the equity market performance will remain range bound in the year 2023 led by overall weaker global cues. However, RBI lifted the inflation forecast for the next fiscal year to 6.7% from 5.7% earlier.
Increasing interest rates and high inflation across the world is dangerous for the stock markets but liquidity and an India-centric focus make the Indian stock market relatively stable and stronger.
SIP culture has picked up very well. The contribution is now sustaining above Rs 13000 cr monthly. Do you see this trend strengthening in 2023?
In recent years, SEBI has taken various steps to persuade MF products among retail Investors and encourage the distribution system by providing more transparency and promoting investor awareness programs.
Though Fiscal 2022 is full of ups and downs for the Equity Market, yet Mutual Funds Industry remains satisfactory on the account of regular cash inflow, especially through the SIP mode.
Over the years, retail investors have realized the value of staying invested for a long period and not being panicked by the short-term volatility in the Market.
The participation of retail investors has increased over the years, on the account of increasing financial literacy and ease to access social media platforms that have changed the traditional psychology of investors. The same can also be seen in the growing SIP book of the country.
The SIP drive is going to continue for sure as more and more people have started understanding the real rate of return due to economic knowledge.
Increasing disposable income and per capita income are the reasons for the increase in this culture. I see this trend, strengthening in near future.
Which sectors are likely to remain in the spotlight in 2023 and why?
The Indian Economy has been growing rapidly since the Corona Epidemic. This reflects by the Equity Market Trends after fiscal 2020.
Looking at the micro and macro numbers of it makes everyone every investor very cautious and it needs to be very specific and choosy for picking stocks. And I feel that the financial market, FMCG, IT and banking will have flavour in the next year.
However, based on previous trends and initiatives taken by the government in the last Union Budget, we have shortlisted the following sectors:
• Automobile Sector
A surge in demand has been witnessed in this sector during the year 2022. In October 2022, the rise in demand across all the segments has been observed on account of a good Festive season.
Talking about the hottest segment of this sector, EV, sales hit their highest at 429,217 units in the financial year 2022, up 218% YoY from 134,821 units in the financial year 2021. This growth is mainly the outcome of the efforts and support of the Government.
Furthermore, the biggest players in the industry like
and Hero Honda are at the forefront. All these factors remain hopeful for a shining 2023 for Automobile Sector.
• Renewable Energy
As the world is in the search of alternative fuel sources, the renewable sector has earned a lot of attention. Moreover, increasing environmental concerns also put this sector into the spotlight.
As of now, the capacity of renewable energy has doubled in India because of huge Government support and a shift in the focus From EPC projects to energy generation and transmission. It is up from 76.4 GW in March 2014 to 151.4 GW in December 2021. Even now, the government has more ambitious plans to ramp it up further to over 500 GW by 2030.
• Sugar Sector
The government of India has taken a lot of measures in the past couple of years that have changed the dynamics of the sugar industry.
Government, with the aim to enhance India’s energy security, reduce import dependency on fuel, save foreign exchange, address environmental issues, and give a boost to the domestic agriculture sector, has been promoting the Ethanol Blended Petrol (EBP) Program. Ethanol blending in petrol in India has risen successively from 1.53% in 2013-14 to 5% in 2019-20 to 8.10% in 2020-21 and now to as much as 10.17 %.
Furthermore, the GOI has set the target of 20% of Ethanol blending in petrol by the year 2030. Recently, we have seen a rally in Sugar stocks after the announcement by the Govt. that it may consider increasing the sugar export quota for the current 2022-23 marketing year. Moreover, the year 2022 was a good year for the Sugar stocks holders.
All these efforts of the Government remain high for a momentous 2023 for the Sugar Industry.
Overall, FMCG sales in the country are expected to grow 7-9% by revenues in 2022-23, driven by price hikes, while volume growth will be muted at 1-2%,
said. The sector had grown 8.5% in revenues and 2.5% in volumes last fiscal.
We are expecting that higher minimum support prices for key crops and a decent harvest should encourage rural growth and help ongoing recovery in rural demand for FMCG products. Over 35% of yearly FMCG revenue comes from Indian rural areas. These projected growths in Indian villages in 2023 are crucial for the overall revival of the sector.
Information Technology is a sector that will most likely be one of the developing industries in the coming years, as India’s economy requires more hardware, software, and other IT services. IT budgets are expected to grow by 13% YoY in 2023, with a median increase of 5%, at a company level’, states SWZD’s Annual Report on IT Budgets and Tech Trends. Further, recently released reports suggest that India’s IT sector is all set to create 3 lakhs jobs in 2023.
During FY16-FY22, bank credit increased at a CAGR of 0.62%. As of FY22, total credit extended surged to US$ 1,532.31 billion. Credit growth is expected to hit 10% in 2022-23 which will be a double-digit growth in eight years. As of November 4, 2022, bank credit stood at Rs. 129.26 lakh crore. Furthermore, Bank deposits stood at Rs. 173.70 trillion as of November 4, 2022. By 2025, India’s fintech market is expected to reach Rs. 6.2 trillion.
Looking at the recent micro and macro data – how do you see growth panning out in the next 12 months?
We are expecting persistent inflation and rising hawkishness. We forecast that 2022 Real GDP growth will come in at 1.9 per cent year-over-year, 2023 growth will slow to zero per cent year-over-year, and growth will rebound to 1.7 per cent year-over-year.
Post-Christmas markets will get into a mood of Budget 2023 – do you see a more populist Budget as it is the last year before India goes to the polls?
Stock market participants have become cautious before the budget so that they will take thoughtful bets and markets will behave a bit more on the national reasons unless and until there is any big international event.
I don’t think that the budget is going to be populist as India enters into polls every year, Moreover, the history of this government had never been to use populist measures to win the elections.
Thus, I’m not expecting any populist budget for this year too. Moreover, populist budgets are negative for stock markets.
As a participant in the stock market, I guess that the finance minister should consider the long pending demand that Security Transaction Tax (STT) should be considered as an advance tax.
Long-term capital gain tax should be again exempted. CAPEX growth has been strong and India’s corporate profitability to GDP should see an uptick that has been missing for a long.
What are your basic expectations from Budget 2023?
As a determined participant in the stock market, I expect the finance minister to consider the long pending demand for STT as an advance tax. Simultaneously, long-term capital gain tax should be exempted. This would lead to a positive cash flow in the equity markets, investors would have higher purchasing power and an overall boost in investments will be visible.
Furthermore, GST Rule’s complications are one of the biggest pain points for entrepreneurs and decriminalization of GST offences as recommended by the GST council should be taken into consideration and implemented as this would help in the overall growth of the industries.
In addition, the government should cut import duty on electrolysis which would boost the green energy sector and our FIIs will be incremented further.
Apple iPhone started its production in India, and they aim to produce 25% of its entire production in India by 2025.
This could be considered one of the lucrative investments for India and the Government should support the initiative further by promoting their concerns and giving certain tax benefits.
India outperformed the globe in 2022 – do you see a similar trend in 2023 as well?
India has outperformed the world because of certain advantages that India has to offer and would continue to offer in the future as well and certainly the outperformance of the Indian Economy would continue in a similar trend for FY 2023.
Many factors facilitated for India to outperform. First and foremost being, India has been able to negotiate crude at a cheaper rate from Russia.
Besides, India has a strategic advantage over China and other developing countries plus a consumption centre and projects like make in India are further attracting Investments in India for manufacturing the products.
Therefore, it could be said and seen India is a consumption and manufacturing centre for the world. This would keep attracting foreign investments across sectors in the coming times.
At the same time, government spending would increase in the following year in terms of infrastructure and for the betterment of people.
Ease in supply chain management, employment generation, increase in low-income jobs would act as a catalyst for the growth of The Indian Economy.
Technology upgradation specifically in the stock market leads to a high number of opportunities for the traders and the young generation and youth is the future for any country, not just India.
Today it could be said stock market is not just a Broking industry but a highly developed fin-tech industry.
Any big events that investors should watch out for that could derail the D-St bull run?
The events to look out for would be the covid situation in China, the Russian-Ukraine war, Stagnant interest rates and fluctuations in Crude Oil prices.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)