Chennai: India’s economic growth continues to remain strong even in times when the world is facing economic turbulence, says DSP Mutual Fund in the February 2023 issue of its monthly report Netra which tracks the latest economic trends and insights. The report highlighted that India’s high-frequency indicators remain robust. These include healthy GST collections, near record high volume of petroleum products sold (a proxy for consumption), and electronic toll (including Fastag) collections indicating brisk economic activity along with business activity and sentiments being positive.
– Indian economy consolidation and steady earnings growth to make
India an attractive investment destination in 2023
– Banks and Autos are prime picks
– Corporate bond market likely to be attractive for investors
The report mentions that the recent flat performance of the Nifty Index compared to a 26% rally in the MSCI Emerging markets index has resulted in the vanishing of India’s high valuation premium over its emerging market peers. This is a positive development as foreign inflows in India have become muted lately due to high valuations. Further consolidation and steady earnings growth can cause India to become attractive once again as we progress into 2023.
DSP Mutual Fund feels there is an opportunity in the bond market. Whenever RBI has raised rates, corporate bond spreads have gone up. This monetary policy is the least disruptive because rates are not as high as the previous cycle, liquidity conditions are better vs the last hiking cycle, and corporate spreads are also not very high. This means corporations can borrow even during the tightening cycle, and the rates are more conducive. This will help in India’s growth from a long-term perspective.
DSP Mutual Fund believes that the Banking sector is poised for an appreciation. The current dip in banking equities is another opportunity to add lenders over borrowers. The ratio of the NSE Bank Index to the NSE Metal Index bottomed when the yield curve was very steep & RBI was about to embark on a rate hike journey. The recent correction in Banking stocks & a rally in Metals equities makes it an attractive proposition. The auto sector is also looking very promising.
The long-term earnings trajectory for the technology sector continues to remain attractive. Investors waiting on the sidelines will likely get a good opportunity to buy into this valuation and price correction in the technology sector.
“The most important thing for equity markets in 2023 is earnings growth and softening valuations. The last 17 month of consolidation has removed a lot of valuation froth. There is a higher likelihood of a better market backdrop going forward,” said Sahil Kapoor, Market Strategist and head of products at DSP Mutual Fund.
