• Banking / Finance

Kotak Securities Ltd- Market Outlook 2023

• Prashant Kapadia
• December 20, 2022

Bull case scenario to take Nifty to 20,919 in 2023

by Prashant Kapadia/NHN

When global markets and indices tumbled, India stood resilient and is already the fastest-growing economy in the world, clocking 5.5% average gross domestic product growth over the past decade. While the IMF predicts global growth to slow from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023, the World Bank forecasts India to grow at 6.9% in FY23 and 6.6% in FY24. While equity markets have faced 4 consecutive shocks in the last 2 years in the form of Covid, high inflation, geo-political strife and a sharp rise in interest rates, the Indian economy has been able to withstand these shocks relatively better than other economies, thanks to the cyclical upturn, capex recovery, and manufacturing tailwinds. Over the medium term, the Indian economy should be supported by a favourable policy environment, the impact of PLI schemes, opportunities arising from the shift of the global supply chain, Government thrust on infrastructure spending, etc. Post strong 40% earnings growth in FY22, we expect net profits of the Nifty-50 Index to grow by 10.8% in FY23, 16.3% in FY24 and 15.5% in FY25. Sectors like automobiles, banks, diversified financials and telecom are likely to contribute to the bulk of growth in net profits.

“India’s economic and earnings recovery coupled with capital expenditure cycle, (including PLI scheme) is expected to keep Indian markets attractive over the long term.” said Jaideep Hansraj, MD & CEO, Kotak Securities Ltd.

In a base case scenario, Kotak Securities has set Nifty target at 18,717 for 2023, while in a bull case the benchmark Nifty could reach 20,919. However, in a bear case, the Nifty target is set at 16,515.

Gold to glitter in 2023: A looming recession, reasonable higher inflation, a falling dollar, and a highly uncertain geo-political situation, gold is expected to perform well in 2023. Gold in the international market is expected to trade in a range of $1670-2000/oz with a positive bias in 2023. On the MCX, gold may trade in a range of Rs 48500-60000/10 grams.

Volatile crude oil: Crude oil prices are expected to remain volatile in 2023 as the EU will have to find a replacement for Russian crude while economic activity remains subdued. We, however, do expect a sustained decline unless supply risks improve or there are signs of a significant slowdown in demand. WTI Crude oil is expected to trade in a range of $60/bbl-$100/bbl, and MCX Crude is expected to trade in a range of 4700-8300 with a sideways to positive bias.

Rupee may exhibit volatility, but upside risk remains: After a low volatility in 2022, rupee and almost all currencies may witness huge volatility in 2023. In 2022, USDINR had rallied nearly 10% to an all time high of 83.25 on spot. In 2022, we could see prices form a sideways to upward range. We expect an overall range of 79.50 and 86.50 on spot in 2023.