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Windmill Capital lists 6 themes to watch out for in 2023


The Indian market will continue to exhibit resilience in 2023 following the trend from 2022, believes Windmill Capital, a research analyst and subsidiary of fintech company Smallcase Technologies.

Despite global headwinds that led to most international markets posting losses, the Indian market managed to end 2022 with positive returns.

The RBI’s gradual policy normalisation has prevented the market from a sudden shock, and India has demonstrated exceptional business resilience in uncertain times, claims Windmill Capital. The Indian government has also been extremely proactive in managing multiple crises, including the Russia-Ukraine issue, it added.

Indian markets managed to post gains of 3.02% in 2022

“We expect the secular growth to continue for the Indian equity market as most of the pain in terms of rate hike, deficit is factored in. Geopolitical tensions, recent resurgence of COVID-19 cases in China, and the rate action by the Fed will guide markets, currencies and crude oil prices. Although inflation has begun to trend down, there is no surety that it will be under total control going forward and that is something to watch out for,” said Naveen KR, Smallcase Tech Manager and Senior Director at Windmill Capital.

The Securities and Exchange Board of India (SEBI) registered research analyst firm views manufacturing, electric transportation, and infrastructure as significant themes. 

Let’s explore all of the 2023 themes it has listed, individually.

Six themes to watch out for in 2023

Specialty chemicals – The China + 1 strategy and potential coverage under the Production Linked Incentive (PLI) programme are expected to have a positive impact on the sector. The Indian chemicals sector has the chance to position itself as an alternate destination for the production of key chemical raw materials.

Electric mobility – The government’s efforts have made a difference, and numerous incentives have been offered to persuade individuals to purchase electric vehicles (EV). Considering the significant infrastructure construction going on here, it is undoubtedly an interesting area to observe.

Infrastructure – One of the primary growth drivers for the infrastructure sector in India is the strong push from government policy, which is paired with a favourable environment for capital expenditure.

Auto – For automotive manufacturers, the supply-side pain points have started to lessen. The demand pipeline for auto firms is also very solid, which boosts confidence in this industry even more.

Banking – A dealmaker for the sector is a strong credit off-take coupled with a quick improvement in asset quality. For significant private players, deposit rates have been favourable as well. It is anticipated that the banking industry would continue to benefit from strong credit demand, low provisioning, and high asset quality.

Defence – The FY23 Budget estimates that India will spend $54 billion on its military, ranking third in the world. India imported the majority of its needs up until five years ago. However, the government has moved its attention to indigenisation, where domestic companies are not only filling domestic orders but also exporting to foreign countries, which has caused a spike in exports.

However, according to Naveen, a slowdown in the West will have maximum bearing on the Indian information technology (IT) and exports sector.

“The government should continue its reforms in 2023 and present a fiscally responsible budget, which will be the last of their current term,” added Naveen.

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Retail investors and Indian stock markets

First Published: 06 Jan 2023, 07:45 PM IST



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