While most major stock market indexes across the globe have been in the red this year, India’s Sensex and Nifty have been bright spots. Investors in Indian equities have been able to avoid the devastating losses that have hit the global share market so far in 2022.
Both the Nifty50 and the Sensex have reached fresh record highs in the last several weeks. The Shanghai Composite Index in China is down over 11%, the Nikkei 225 in Japan is down nearly 5%, the FTSE All-Share Index in London is down nearly 5%, the S&P 500 in the United States is down over 17%, and the Dow Jones is down over 7%; however, the Sensex and the Nifty in India are both up around 5%.
But can we expect more gains on India’s stock exchange in the year 2023? According to a Bloomberg analysis, experts and strategists agree that Indian equities are likely to lose steam next year due to sky-high valuations dampening market euphoria.
In addition, they anticipate that the Indian Rupee would underperform other emerging-market currencies and that the inclusion of Indian bonds in key global indices will be beneficial.
Hiren Dasani, managing director at Goldman Sachs Asset Management, stated that “some of these economies that have gotten oversold may do better than India since India has excelled so much in the previous 18 months” in the next six to twelve months, assuming a rebound in global GDP and mood. However, in time, India will see significant improvement because of the compounding possibility of development.
What 2023 holds for Indian markets, according to JP Morgan, Citi Group, Jefferies, and Goldman Sachs:
India is the costliest major market in Asia, despite being a market leader this year. This, according to Goldman Sachs Group Inc. strategists, will result in India’s stock market performance falling behind that of China and Korea in 2019.
By the end of 2023, Citigroup Inc. expects the Nifty to be at 17,700, or about 5% below Thursday’s level. According to the research, the blue-chip average is trading at a multiple of just under 20 times projected earnings expectations, while the MSCI Asia Pacific Index is trading at a multiple of approximately 13.
Citi, however, said that Indian listed businesses are skilled at parlaying economic development into profits per share and that cyclicality has been contained in the Indian stock market.
Goldman Sachs, in a contrarian stance, has set a goal for the Nifty that is nearly 10% higher at 20,500 for the same period. As inflows return to developing markets, the Reserve Bank of India (RBI) is expected to take advantage of every chance to replenish its reserve stockpile, which might put pressure on the currency.
The Reserve Bank of India (RBI) has experienced an $83 billion reduction in reserves this year as a result of the sale of dollars to maintain the rupee and the decline in the value of its other foreign assets. Since then, the currency has lost almost 10% of its value versus the dollar, which is about average for developing Asian currencies.
According to a Bloomberg report, the value of the rupee against the dollar was close to 82.40 on Thursday. The value of the Rupee would drop to about 84-85 per dollar in 2024, according to several economists and experts.
JPMorgan Chase & Co. analysts still predict further currency depreciation in 2023 due to India’s commercial standing. After JPMorgan and FTSE Russell refrained from adding India to global indexes this year due to operational concerns, bond investors are hoping that the country would be included next year.
After JPMorgan decided not to include Indian government debt in its gauge in October, global investors sold index-eligible Indian sovereign bonds for the first time in seven months.
Goldman Sachs has predicted that inclusion in JPMorgan’s emerging-markets index would occur in 2023 at the earliest. Despite rising federal borrowings, foreign investors own less than 2% of India’s national debt.
Moreover, bond sales denominated in the Indian Rupee are expected to pick up again in 2023 as issuers switch from bank loans to notes that provide greater savings. Based on statistics collated by Bloomberg, the total amount of domestic bonds sold by companies so far this year is about 8 trillion rupees ($97.1 billion), which is almost unchanged from the same time period last year.
To what degree these forecasts for bonds, the rupee, and the stock market come true in the next year is an open question. Wait and see what happens till then!