New Year Outlook & Top Picks – 2023 by Motilal Oswal

Dear Investors,

India outshined global markets in the year 2022, as it stood resilient to several global headwinds like; high inflation, rising interest rates, currency swings, geopolitics uncertainties and the onslaught of FII selling. This resilience has been led by several structural tailwinds which has placed India in a bright spot on the world map.

Despite a roller-coaster ride, Nifty gained 4% (as of 22nd Dec) for the year as compared to 10-20% fall in most of the global indices. Infact it touched a fresh life high of 18,888 in Nov’22. Nifty Midcap index too remained resilient and gained 3% YTD. However Nifty Smallcap index faced the major brunt with a fall of -15%. PSU Banks were clear outlier, witnessing a rally of 64% in the year till date.

The driving force behind India’s outperformance has been:

• Pick up in capex by Central Government which revived Indian economy from Covid-led slump and
• Strong consumption demand which reflected in the buoyant domestic macro data points. GST collection stood above Rs1.4 lakh crore for 8th consecutive month while e-way bill generation has remained above 7 crore since Mar’22.

Combination of these factors have resulted in strong corporate earnings growth of 24% CAGR over FY20-22. Other economic indicators like GDP and PMI too recovered well post pandemic and has maintained its strength since then. This reflected in the credit growth upcycle which has been growing at decadal high of more than 15% for past few months