Usher in 2023 with Optimism, Opportunities and Options

As we start a fresh year, it gives us an opportunity to reflect on the year that was and draw important lessons from it. In the months gone by, economic and financial markets underwent geopolitical tensions with a rapid rise in interest rates globally with the sole objective of containing inflation. The sudden tightening of inflation in major economies across the globe resulted in most of the asset classes, including equity, debt and most of the precious metals, giving negative returns in 2022. 

The Indian equity market, however, remained an oasis in the desert. Frontline equity indices on YTD basis have generated positive returns in India compared to about 20 per cent drop that many other developed as well as emerging markets witnessed in 2022. The sector that stole the limelight was Nifty PSU Bank that delivered a whopping 70 per cent return! The expansionary budget has also been one of the major highlights in 2022. While the government capex was above average in 2022, what surprised many was the growth in capex for railways. 

The reason why the Indian markets outperformed was the inherent domestic economy strength reflected in economic indicators such as GDP number, PMI and GST collection that stood above ₹1.4 lakh crore for the eighth consecutive month now. Going ahead, as the impact of higher interest rates starts seeping into the global economy we may see recession in some parts of the world. The Indian economy might be relatively less impacted due to a strong domestic economy. 

Therefore, I believe the theme to play in 2023 will be companies that are part of the capex cycle such as infrastructure, banking and cement. In addition, these sectors have a rising scope to benefit from outsourcing on account of the China Plus One and Europe Plus One strategy. If you must take any cues from the year 2022 for 2023, one can look at the consistency in policymaking by the current government led by Prime Minister Narendra Modi. 

Now, to understand precisely where you should park your money and how to play the equity market in 2023, do not miss the current issue’s cover story titled ‘Where to Invest in 2023’. The cover story will not only help you understand the market direction and the sectors that are expected to do well but also a present a narrowed down selection of 10 stocks for the coming year. Further, in a special story in this issue, we have discussed in detail the nitty-gritty of portfolio diversification. We have noticed that portfolio diversification – even though the key to portfolio management and investing success – is not understood in the right spirit and the concept of correlation which is the key to portfolio diversification is not absorbed by the investors at large. 

As we move into 2023 the key lessons gleaned from 2022 must not be forgotten. For example, the emergence of PSU banks tells us that completely ignored stocks can prove to be multi-baggers and that a sector like IT which is a darling for most investors can underperform. The clear message that 2022 has given to investors is to have an open mind and not blank out to any specific sector just because it has underperformed for several years. Despite the volatility, we have seen at least 270 stocks more than double in 2022. India is in a sweet spot globally when it comes to economic development and increasing demand. As such, there may lie a fascinating year ahead for all of us as we head forward with a lot of clarity. I am sure the market strength will reveal many multi-baggers and promising investing opportunities as we complete the journey of 2023. Happy investing and stay tuned to DSIJ for the latest on equity markets! 

RAJESH V PADODE
Managing Director & Editor