2022 is about to end. 2022 has been a turbulent year for markets, both in India and internationally. 2023 won’t be any different in that regard. It will be fascinating to observe how things develop and how quickly central banks and governments adjust to them since inflation and recession are still some of the most important things to watch out for.

2022 was a difficult year for stocks. Equities will close 2022 with 5% gains after swinging 20% in 2022, despite strong inflation, increasing interest rates, and the dollar’s ongoing rise. 2023 is expected to be just as turbulent. Market volatility will persist into 2023 as well, although favorable returns are still anticipated for 2023. Market instability occurred in 2022 as a result of the Russia-Ukraine war, inflation, and recession worries in the US, which is anticipated to continue into the following year.  Some of the issues like inflation and recession will probably persist until 2023 as well. However, the discussion these days give emphasis on a slow economic recovery and a gentle landing for the most developed nations. It is understandable why many experts think that in 2023, the benchmark Nifty50 might fluctuate between 17,000 and 20,000.

India is anticipated to see a considerably smaller decline in economic growth than other nations, even if the entire globe enters a recession. India’s growth slows down by 180 basis points during recessions, compared to a 280 basis point decline in the USA, according to a Bank of America research of recessions spanning three decades. It is also observed by Bank of America that India’s economic growth downturn is shorter which is 1-3 quarters compared to 2-7 quarters for the USA, and India also recovers more quickly compared to any other nation.

Anticipated volatility in H1 2023

In the first half of 2023, the most recent monetary policy statement given by Governor expressed that further calculated monetary policy action is required to keep inflation expectations “anchored” due to geopolitical unpredictability and financial market fluctuation. According to him, The RBI will keep an “Arjuna’s eye” on inflation and take appropriate action as needed. This is so that rising interest rates won’t affect growth as central banks throughout the world continue to fight inflation. On the other hand, Srikanth Subramanian, CEO of investing platform Kotak Cherry by Kotak Investment Advisors said a relieving statement that Indian markets have outperformed worldwide rivals by a significant margin.

In addition, there is still concern that a recession may impact important global economies in 2023. It’s important to keep in mind that if the recession is severe, India will also feel the heat and it would be very challenging for Indian markets to remain isolated for an extended period of time, according to Subramanian. The dramatic decline in US markets indicates investor worries of a recession. However, if a US recession materializes, Indian markets, which have been rather robust, may not last for very long because a worldwide economic downturn would not be beneficial for India, which exports around 20% of its total output. The benchmark Sensex and Nifty50 indexes have increased by around 4% so far in 2022.

Cryptocurrency? Not A Good Idea

Side by side, the cryptocurrency which is a sort of fashion will also lead to help in financial crisis. Cryptocurrency is a fancy word to describe speculative activity by every means. The governor of India considers cryptocurrencies absolutely worthless and poses a significant risk to the macroeconomic and financial stability of India. Analysts predicted that cryptocurrencies will cause the next financial catastrophe.

H2 2023 May Have Settled Indian Economic Problems

While worries about the recession and interest rates will persist, the outcome of the general election will be determined by the second half of the year. Additionally, economists predict that markets will strengthen in the second half of the year since inflation is expected to have settled by then and monetary policy would have loosened. According to research by Antique Stock Broking, “Global GDP outlook is projected to improve in the second half of the calendar year 2023 (particularly US) due to dramatic decrease in inflationary pressures in 2023, relaxing monetary policy towards end 2023, and lower base.” Analysts also place too much emphasis on the financial, consumer discretionary, technology, and infrastructure sectors. According to Morgan Stanley, it is underweight in all other sectors and overweight in the consumer discretionary, industrial, financial, and technology sectors. One or more of the major topics for 2023 include electric cars, sustainable energy, digital revolution, and the air travel cycle.

In terms of key themes for 2023, Morgan Stanley stated that “we continue to pursue ideas around clean energy spending, defense indigenization, a new residential property, auto, and air travel cycle, a multiyear credit cycle for financials and life insurance, digital transformation, and market share concentration, as well as horizontal growth for discretionary and staple consumption and electric vehicles.” According to a Morgan Stanley research, “the market should start factoring in its perspective on the general elections (scheduled for May 2024) going into the second half of 2023, with either outright repositioning or major hedging of portfolios.

Dalmia, founder, and director of Proficient Equities “We think the private CAPEX cycle is ready to start up again. The Made in India and PLI programs, according to Manoj Kumar Analysts anticipate that markets will accelerate as the volatility subsides by the second half of 2023. According to Bank of America, the Nifty will conclude 2023 at 19,500, which suggests modest but favorable gains. India’s values are anticipated to stay high in the coming year despite the volatility. The Made in India and Production linked incentive schemes show that the Indian government is still committed to investing in infrastructure which will lead to banks, insurance, industrials, and the cement will all prosper in H2 2023. Undoubtedly, some of the more established themes will persist in 2023 even as attention turns to economic recovery and profit growth.