Phillip Nova analyst expects private capex pickup, says demand to stay strong
Going into 2023, Indian equity growth can receive a mild blow as current foreign portfolio investment (FPI) flows might weaken slightly and instead shift to China based on prospects of its economy fully re-opening post-Covid by next year, says a Singapore-based market analyst.
Nevertheless, private sector capex will likely pick-up as strong earnings momentum continues and demand conditions are expected to stay strong in the domestic market, added Priyanka Sachdeva, market analyst at Phillip Nova Pte Ltd.
Strong domestic demand and the Government pushing for output increase in manufacturing sector in a bid to make India more self-reliant and reduce import dependability add additional sheen to the bullishness to Indian equities against entire global mayhem, she said.
MSCI’s emerging index has placed a weightage of 14.9% on Indian equities, the second highest after China’s weightage so while caution is the tone in global equities, investors in Indian equities for a couple of year horizon should start picking up favourable opportunities to invest, Sachdeva underlines.
She also pointed out that after a turbulent 2022 global equities are headed towards an equally volatile 2023 and the outlook for Indian equity markets will depend on the actual growth in the domestic economy.
While the US is battling stickier-than-ever Inflation, Euro-Zone tackles dependence on Russian energy amid supply disruptions since the outbreak of Russia-Ukraine crisis and China is adamantly on course with Zero-tolerance to Covid, Indian equities have proven resilience over recent significant economic downturn and have managed to outpace emerging economies average growth with prospects of about 6.5% in 2022.
Outperformance of domestic equities resilient to downturn in past 2 years, structural rise in equity pool, focus of FDI flows and a boost to corporate profit contribution to GDP has allowed the country to run monetary policy that is less sensitive to the US Federal Reserve, and reduced the equity market’s sensitivity to US growth conditions and oil prices.
“Inflation in India continue to remain well within control as RBI seems to be proactively tackling monetary flow in economy and likely rising rates in India wouldn’t be prolonged without significant demand destruction,” Sachdeva said at the FIA Asia 2022 on 1 Dec 2022.
She observed that the Indian stock markets reacted very fast and fell a significant chunk on the very first day of Russian invasion on Ukraine but bounced back up the very next day. Since then, the Indian stocks have been resilient to every shock including geopolitical tension, Federal Reserve rate hikes, possibilities of global recession disregarding even the supply shock and soaring fuel prices.
Year to date, Nifty has risen over almost 25% from the lows of 15202 on 20th June. Nifty gained 6.25% from 17677 mark in beginning of 2022 to recent life time highs of 18998 on December 1.
As per official figures from SEBI, Foreign Institutional Investors inflows in Indian equity amount to Rs.38,235 crores for the month of November 2022. fiinews.com
