ETMarkets Smart Talk | New-age platform businesses could turn out to be dark horses in 2023: Jaspreet Singh Arora


Jan 07, 23 | by: Jaspreet Singh Arora

In an interview with ETMarkets, Arora said: Consumer discretionary, banking, and PSUs will be the key themes that should do well in 2023. Select names in sectors such as IT, metals, pharma, and building materials would also be in the reckoning. Edited excerpts:

How do you sum up the year 2022 and where do you see the markets headed in the year 2023?
In 2022, while the market returns have remained flat, the markets have been very volatile. Individual portfolios with a focus on smallcaps would be in the red.

The Russia-Ukraine war, rising inflation, Fed and RBI rate hikes, etc made the markets very volatile.
With a better economic outlook for India as compared to other major economies, clarity emerging on recessionary fears, and interest rate peaking towards mid-2023, we see that the outlook for 2023 is trending towards high single-digit to low double-digit growth in Nifty.

Individual-focused quality multicap portfolios could well grow in double digits.

Do you see the bull run continuing in 2023? Which are the headwinds that one should be aware off?
Yes, we see the bull run continuing in 2023. With the rate hike expected to take pause towards mid-2023 and crude becoming cheaper amid the recessionary environment, India will benefit a bountiful.

Domestic demand, private capex, and infrastructure spending by the government are expected to help boost the economy.

Some of the headwinds for the market could be the continuation of the Russia-Ukraine conflict, rising Covid cases, and a longer phase of high-interest rates.
New Year also marks the beginning of Budget 2023 preparations. What are your expectations from Budget 2023?
FM Nirmala Sitharaman stated that the Budget for FY24 will set a template for the next 25 years.

The budget is expected to focus on capital spending, infrastructure development, incentivising domestic manufacturing, and boosting growth. No big announcements regarding additional taxes are expected.

Given 2023 will be the last budget before general elections there could be certain programs aimed towards rural upliftment and social welfare but nothing that would rock the boat of fiscal deficit.

Which sectors will be in focus ahead of the Budget? We have already seen some rally playing out in sectors like Infra, Rail etc.
Sectors related to infrastructure, domestic manufacturing, and renewable energy will be in focus ahead of the budget as announcements on the same are expected in budget.
PLI schemes for domestic manufacturing and announcement on increased capital expenditure are expected to be part of the budget.

Do you see tinkering with income tax slab in this budget?
With two tax regimes made available to the taxpayers, further changes in the tax slabs are not expected. Limits on some of the deductions and exemptions can be changed to provide some relief to the taxpayers.

Which themes will do well in 2023 and why?
Consumer discretionary, banking, and PSUs will be the key themes that should do well in 2023. Select names in sectors such as IT, metals, pharma, and building materials would also be in the reckoning.

The G20 summit and ICC world cup will be key triggers for the consumer discretionary theme as tourism, hotels, and restaurant business are expected to benefit from it.

The systemic credit growth is expected to be around 14-15% YoY over FY22-24 driven by consumption and private capex growth, thereby benefiting the banking space.

IT has underperformed in 2022 and the current valuations have already priced in the degrowth in earnings thus making a case for a buy.

PSUs have been laggards in the yesteryears, but their outperformance in 2022 leading to re-rating and renewed investor interest makes it a theme that will be difficult to ignore in 2023.
COVID is rising again – do you think it could well turn out to be the next trigger for selloff in equity markets?
90% of the adult population in India is fully vaccinated. Also, India is better prepared to tackle another wave of COVID through the experience of the previous two years.

We can also see the centre and state governments proactively taking steps to avoid COVID from spreading widely.
Also, markets generally do not crash more than once for the same reason. A minor correction followed by consolidation is always possible in any year.

Amid recessionary fears across the globe, how do you see India stack up against all odds?
India’s GDP is expected to grow at 6% in 2023 which is much in excess of any other major economy. Inflation is also expected to be below 6% which is in the RBI’s tolerance band of 2%-6%.

In November 2022, the GST collection had increased by 11% YoY to Rs 1.46 lakh crores which is a testament to the strong domestic consumption demand.

The domestic demand coupled with infrastructure spending by the government is expected to insulate the economy from recessionary pressures.

Any sector according to you that could turn out to be a dark horse in 2023?
The new-age platform businesses could turn out to be dark horses in 2023. These stocks have corrected significantly since their IPOs, while their fundamentals have improved quarter after quarter.

These businesses are taking the necessary pivots towards profitability thus increasing the possibility of an earnings surprise and outperformance with respect to the market.

Also, the risk of further fall in NPV due to higher interest rates would abate once global banks start indicating the peaking of interest rates sometime towards mid-2023.

Your message to investors for 2023?
Remain invested. The ride may be bumpy but a prosperous one provided one is investing with a 2–3-year view.

With the global recessionary environment, the improvement in fundamental and earnings growth might not translate to stock returns immediately, but these periods of underperformance would provide investors with the opportunity to continue adding to their investments.


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