See Nifty50 target of 21,000 by December 2024 in base case scenario: Vinod Nair

economictimes.indiatimes.com:

We had positive consideration for a few sectors and optimism for India’s long-term economic progress. However, we recognised the near-term risk of India underperforming the rest of the world, being the most expensive market in the world. We were 100% and 40% overvalued compared to China and EMs at that time.

And the possibility of a slowdown in corporate earnings was high due to elevated global inflation and the recession. We favoured a 60:40 ratio for equity for a medium risk taker. We were not very negative on equities because the global economic slowdown was presumed to be non-structural and unlikely to trigger fundamental issues.

Sectors like FMCG, Retail and Manufacturing were suggested as safe bets. The hospitality and media were interesting due to high footfalls and consolidation in the industry. Sectors like IT, chemicals, and pharma were forecasted to correct in the short to medium term.

Industries and companies highly associated with the international market are vulnerable in the short term. We presumed that highly valued companies will not perform well in 2023 and that value buying will be the theme of 2023. High-debt companies and rate-sensitive sectors like finance, auto, and consumer durables could lose in the short term.

While after the initial hiccups, finance, and auto have performed well during the year due to stable credits and volume growth. The broad market corrected by about -10% between December 2022 to March 2023. In April, we upgraded the view on the market by suggesting an increase in equity weight up to 75% based on the risk appetite but maintained the neutral view due to the still slowing economy.