‘Markets in 2023 will remain volatile as macro headwinds in the US & Europe is still challenging’: Avinash Gorakshakar

According to Avinash Gorakshakar, Head-Research at Profitmart Securities, new investors must allocate capital carefully in direct equity and equity mfs in 2023, only if they have a long term time frame. In an interview with MintGenie, he said it would be better for new investors that they don’t invest in a lump sum manner but do a systematic investment plan (SIP) in stocks and stagger their investments, which will benefit them from the market volatility.

Further, he also spoke about his expectations from the upcoming Budget, small-cap stocks, and the sectors that are likely to perform well in 2023.

1. Where is the market headed in 2023 given the backdrop of rising interest rates, worries about the recession, geopolitical difficulties, and China’s COVID-19 issues?

The markets in 2023 will remain volatile as macro headwinds in the US and Europe continue to be challenging. In the domestic markets also, higher interest rates and rising inflation are near term challenges plus we have 5 state assembly elections in 2023, which will add to the market volatility.

Our sense is that on a index level basis as compared to last year we are unlikely to see any major upside movement, but on a broader market basis this will be a stockpickers markets where select companies will do very well, and where earnings growth would remain strong in 2023-24 also.

2. What are your expectations from the forthcoming union budget? In your opinion, which industries will the government give top priority in its budget?

We expect the Budget to remain focused on fiscal discipline and would encourage domestic manufacturing, infrastructure and health care. In our opinion domestic focused sectors like capital goods, affordable housing, real estate, autos, green energy pharma and health care, roads, engineering, procurement, and construction (EPC) and agri would be given focus by the government. For export oriented sectors also the govt may announce some package to help them as focus on exports will also be important.

3. What should a new investor be on the lookout for in the upcoming union budget 2023?

This budget being a pre-election budget before the general elections in 2024 is expected to be a healthy budget both for industry and individuals. Some benefits for individuals in terms of tax limits may be reviewed while domestic investment will be encouraged for sectors. In all we would like investors to focus on domestic themes where demand is strong and which are not dependent largely on export demand from either US or Europe.

4. What do you anticipate from the 2023 budget for the information technology (IT) sector,infrastructure sector, capital goods sector, and manufacturing sector?

As mentioned earlier manufacturing, infrastructure, and capital goods will continue to get a big boost in this year’s budget also. This is because the government wants massive capital formation in the country which is possible only via these sectors. For IT it is unlikely that any specific benefits may be given but domestic infrastructure needs for IT especially relating to data centers could be given some special tax benefits.

5. Which defensive sectors should new investors take into account for 2023?

Fast-moving consumer goods (FMCG), Consumer Discretionary, Hotels & Hospitality, Defence and Building Products could be considered as both defensive and growth sectors for 2023.

6. In 2022, small-cap stocks underperformed. What do you think will happen in 2023? Do you advise investors to place bets on it?

Small caps would definitely bounce back in 2023 but a large part of this improvement would also depend on the broad market improvement in 2023. A lot of investors have entered mid caps at very high valuations, and hence have seen under performance here. We believe that select mid caps with a good business model, a strong balance sheet and a healthy capital allocation structure would do well in 2023 provided they have patience and hold on here for a longer time frame.

7. What advice would you give to new investors in 2023?

New investors must allocate capital carefully in direct equity and equity mfs in 2023 only if they have a long term time frame. As 2023 will be very volatile both due to global headwinds in US and Europe and domestic factors like state elections with other headwinds like inflation and rising interest rates ahead.

Given this backdrop it would be better that they don’t invest in a lump sum manner but do a systematic investment plan (SIP) in stocks and stagger their investments which will benefit them from the market volatility. The outlook for Indian markets is strong over the next 3-5 years but in the near term market volatility will be present which investors need to face by taking adequate exposure to large caps and keep a small portion of their portfolios in mid caps to generate significant alpha over the long term.