A Season to Cheer

Last week most of us breathed a sigh of relief as the much-awaited news on the macroeconomic front indicated that retail inflation, measured by CPI, had finally eased to an 11-month low! CPI inflation for November fell to 5.9 percent, primarily led by easing of food prices. Though core inflation stayed sticky at 6.26 per cent, it raised hopes that the rate hike regime could slow down and take a pause going ahead. Coincidentally, even the inflation number from the US was encouraging and came lower than what the street was expecting. This augurs well for the entire equity market worldwide. However, caution still prevails.

I believe that the geopolitical tension that started this year will spill into early next year too. The impact of this along with substantial rate hikes by the Reserve Bank of India (RBI) and other central banks will keep a check on equity returns at a broader level next year. What will also harness the returns is the higher valuation levels at which the equity market is currently trading. However, not all the sectors are trading at high valuations. Credit cycle, investment cycle and real estate are the three major themes that are still available at reasonable valuation. 

These themes started their positive journey this year and are likely to continue even in the course of the next year. And these are the themes that may play out for multiple years. They have started to move after a gap of more than 10 years. For example, since 2012 most of the PSU banks were suffering from higher non-performing assets and there was no credit growth. However, this is now changing and is reflected in higher credit growth and their stock price performance too. They have remained one of the best performing themes this year. 

With much cleaner balance-sheets now, they are going to finance the next investment cycle. Capacity utilisation in India is currently around 75 per cent up, which is above the long-term average and signals the need for fresh investment and capacity addition. Besides credit cycle and investment cycle, real estate is another theme that will do well going ahead. In our special issue this time we have detailed the first half of FY23 financial performance of top 1,000 companies by market capitalisation. We have also segmented the companies into 24 sectors for easier consumption. 

The coverage of the sectors and the indicative trend in each will provide you a good insight on what sectors to focus on. With FIIs back in the game, it was apt to talk about FIIs in our cover story and what to expect from them in 2023. I am sure the inputs provided in the cover story in this issue will help you to take portfolio decisions for the coming year. Our next issue is going to be about ‘where to invest in 2023’. Make sure to pick up this copy and get a head-start on your investment journey for the coming year. We wish you and your family a Merry Christmas!

RAJESH V PADODE
Managing Director & Editor