Highlights from Mirae Asset Mutual Fund (India)’s outlook on 2023

Highlights from Mirae Asset Mutual Fund (India) ’s outlook on 2023 in this article.

The Perfect Storm of Inflation

Geopolitical tensions + inflation led to one of the fastest rate hike cycles by central banks across the??

2022 - a year of Global Slowdown

Global PMI dipping ??

Equities in a bear phase ??

One of the worst years for US bond markets ??

But India stood out.

Despite global disruptions, India continued to grow ??

RBI’s latest GDP growth estimate is 6.8% for FY 22-23.

Whereas Word Bank’s estimate for global growth ~ 2.9% for 2022.

#Nifty up 6% (in INR)??vs MSCI Emerging Markets down ~25% (USD)

US S&P 500 down ~20% ??

(Above YTD data till 20-Dec)

The chart shows how others fared.

Positives for Indian Equities Markets

??Urban consumption

??Demand for non-food bank credit

???Domestic-oriented sectors

??Strong corporate balance sheets

??Revival of corporate earnings

??Steady inflows

GLOBAL MACROS: 2022 - Year of fastest rate hikes globally

Federal Reserve hiked rates by at least 425 bps.

ECB hiked European rates by 250 bps.

GLOBAL MACROS: Concerns from China

The ongoing Covid situation ??

Potential acceleration ? of China+1 theme

GLOBAL MACROS: The European Winter

Potentially high energy demand and prices??due to sanctions on Russia

Will influence the current high-interest rates and sticky food inflation stoking stagflation / recession fears??

GLOBAL MACROS: Fed's aggression

Committed to achieving the inflation target of 2% against the actual 7.1% inflation data as of Nov-22.

GLOBAL MACROS: Tight Global Oil Markets???

Expect Brent averaging $90 per barrel for the year.

GLOBAL MACROS: Corporate Earnings

- Funding costs elevated

- High-interest rates regime means tough times ahead for US corporate earnings

GLOBAL MACROS: Overall

- Headline inflation may have peaked for this cycle but continuing risks to keep the markets volatile.

- Attractive valuations of Global equities as consumer & corporate b/s in a better position than during the Financial Crisis of 2008.

DOMESTIC MACROS: Capital Market Flows

- Foreign Portfolio Investors (FPIs) were net sellers in 2022 at approx. ?1.38 lac crores ($16.8bn as on Nov-22)

- Domestic Institutional Investors (DIIs) were net buyers at ?2.44lac crores approx. ($29.3bn as of Nov-22).

DOMESTIC MACROS: Split of local inflows

???1.36 lac cr. through mutual fund SIPs

???0.48 lac cr. through EPFO

???0.56 lac cr. through insurance

DOMESTIC MACROS: Reforms to Aid Recovery

??Controlled inflation

??India Stack reforms

????Impact of marquee legislation/s (GST, RERA, IBC, PLI)

??Stable foreign exchange reserves

DOMESTIC MACROS: Govt spending

?Govt's capex boost to economy, while trying to comply with CAD target of 6.4% for FY 22-23.

?Spends on infra, bottleneck removals, logistics indicated by better GST collections & improved pace of total receipts collections.

DOMESTIC MACROS: Corporate Revival

Corporate profits as a % of GDP improved to ?? 5.3% in FY22. Likely to improve further. This was 1.9% in FY20.

OUTLOOK FOR 2023: Mirae Asset Mutual Fund (India)

Constructive on equities

- Economy supported by domestic macros of consumption revival

- but gives caution on headwinds of global uncertainties and elevated interest rate regime that will impact India.

OUTLOOK FOR 2023: Corporate Earnings Growth

- It drove India’s relative outperformance in the last couple of years.

- Consensus estimates put #Nifty earnings to grow by approx. 15%?? on average in

FY 22-24.

OUTLOOK FOR 2023: Banking & Financial Services

- Growth revival in the sector due to demand for non-food bank credit

- Bank deposit growth at ??10%, credit growth??at 15% YOY as of Sep-22 indicates expansion & consumption growth driven by corporate & personal credit.

OUTLOOK FOR 2023: Staples and Discretionary

Mirae Asset Mutual Fund (India) will continue to look at consumer companies in staples and discretionary based on valuations as consumption improves in 2023.

OUTLOOK FOR 2023: Year before the Elections

Mirae Asset Mutual Fund (India) expects govt to focus on rural spending ?? during the year.

OUTLOOK FOR 2023: Not just Growth, but Profitable Growth

Mirae Asset Mutual Fund (India) says Indian corporates will continue to move from chasing only growth to chasing profitable growth.

OUTLOOK FOR 2023: Indian Equity Outcome

- Long-term outlook is solid ??

- From near-term lens, markets seem to be fairly priced.

Mirae Asset Mutual Fund (India) continues to expect low-teens returns from equities over the next 3-5 years

- Investors looking to add fresh investment could invest in Equity oriented hybrid funds, or allocate via #SIPs

- Or, keep aside say 20-30% while making lump sum commitments, for any plausible correction.

Outlook for 2023: Debt

- Year starts with markets factoring in an impending recession, indicated by an inverted yield curve.

- No present visibility of meaningful easing in rates

- But if inflation indeed eases or economic slowdown deepens further, environment may turn more favorable

- While central banks may seek more evidence, markets are likely to move??much in advance.

- Yield curves may get flatter in emerging markets and remain inverted in developed markets.

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