2023 Capital Market Forecast: What to Expect?

How are the Indian Capital Markets are likely to behave in 2023? How can it move? Will it be bullish or bearish or rangebound? Read the article to understand what the experts have to say.

How capital markets will do in 2023

The Indian capital markets have been on a roll in recent years, and 2022 was no exception. Despite the global headwinds caused by the Russia-Ukraine War, supply chain challenges due to the pandemic, and inflation, the Indian stock market outperformed most of its peers. The benchmark indices, the NSE Nifty 50 and the BSE Sensex created new highs in December 2022, demonstrating the market's resilience. Market experts believe that the Indian markets in 2023 will be influenced by a combination of factors, including the ongoing impact of the pandemic and the policy initiatives outlined in the Union Budget. In short, the Indian Capital Markets have demonstrated their resilience and strength, and the future looks bright. This article attempts to examine how the Indian markets can behave given the current domestic and global scenarios.

Given below are the positives and negatives of the Indian economy that can affect the Capital Markets:

Also ReadWant to know about various investment options available

Current Economic Scenario that can boost the Capital Market sentiment

At the start of 2023, let us consider some of the macroeconomic advantages that India has enjoyed in recent years. Investment to GDP for FY23 and FY 21 is 33% and 30.5%, respectively. The country is witnessing higher expenditure by the Government on Infrastructure, Railway, Road and Defence; housing sales figures have reached pre-pandemic levels, signalling a resurgence of the real estate sector; investments based on PLI have started to pick up; EVs and renewable energy sources are experiencing ongoing support and investment; supply chains are being expanded as national security considerations take precedence over economic productivity.

Challenges ahead that can adversely affect Capital Market sentiment

There are concerns for India, as core inflation remains at 6% YoY, with many items showing no signs of slowing down. Experts believe that inflation is likely to ease in FY24. It is anticipated that revenue expenditure will surpass the budget estimate (BE) due to increased spending on MNREGA and subsidies. The current account shifted to a deficit (1.2% of GDP) in FY22 and is expected to widen further to 3.3% of GDP in FY23, and reach approximately 3% in FY24. This exerts pressure on the Rupee and can cause instability in the stock markets, as it impacts interest rates, inflation, and fund flows.

What global factors can impact the Indian Capital Markets?

There are multiple global factors (beyond India’s control) that can affect the Stock Market in the country. These include the price of Brent Crude, the performance of the Rupee against the USD, actions of the US Fed, recession fears, geopolitical tensions, global pandemic, etc. 

Also ReadWant to read about Market Insights

Personal Finance: Where should investors invest in 2023?

The report, ‘Annual Outlook 2023: Beginning Of A New Era’ by ICICI AMC, focuses on investment trends in various asset classes, including gold, global and domestic equity markets, and cryptocurrencies. Here are the key points from the report.

Debt/Bond Markets Make a Comeback in Fixed Income

According to ICICI AMC's 2023 annual outlook report, debt/bond is set to experience a resurgence in 2023, while the Indian equity market is expected to maintain its value despite negative returns in major equity markets across the developed world.

Valuations in the Indian Equity Market Stay Elevated

The report (above mentioned) indicates that the Indian equity market yielded a 5% return, in contrast to negative returns in most of the world's major equity markets, including those in the US, France, and Germany.

The report states that as of December 1, 2022, National Stock Exchange data shows that the price-to-earnings (P/E) ratio for the Nifty 50 Index was slightly higher than the average of 18.9. Additionally, the price-to-book (P/B) ratio was also slightly above the average of 2.9.

Gold May Shine in 2023

A recent report by ICICIdirect suggests that after a highly volatile year in 2022, gold prices may reach their all-time high of Rs 62,000 in 2023. The report predicts that this increase will be driven by a weakening dollar, as the US Federal Reserve is expected to halt interest rate increases in early 2023 and potentially even lower them in the fourth quarter of 2023.

Also Read: Want to know about Investments

Backed by strong economic performance as compared to other global economies, Indian Capital Markets are expected to perform strongly. Geopolitical situations, global pandemic, high inflation rate, and low growth in global economies are likely to affect the Indian economy and Indian Capital Markets.

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

The Indian capital markets have been on a roll in recent years, and 2022 was no exception. Despite the global headwinds caused by the Russia-Ukraine War, supply chain challenges due to the pandemic, and inflation, the Indian stock market outperformed most of its peers. The benchmark indices, the NSE Nifty 50 and the BSE Sensex created new highs in December 2022, demonstrating the market's resilience. Market experts believe that the Indian markets in 2023 will be influenced by a combination of factors, including the ongoing impact of the pandemic and the policy initiatives outlined in the Union Budget. In short, the Indian Capital Markets have demonstrated their resilience and strength, and the future looks bright. This article attempts to examine how the Indian markets can behave given the current domestic and global scenarios.

Given below are the positives and negatives of the Indian economy that can affect the Capital Markets:

Also ReadWant to know about various investment options available

Current Economic Scenario that can boost the Capital Market sentiment

At the start of 2023, let us consider some of the macroeconomic advantages that India has enjoyed in recent years. Investment to GDP for FY23 and FY 21 is 33% and 30.5%, respectively. The country is witnessing higher expenditure by the Government on Infrastructure, Railway, Road and Defence; housing sales figures have reached pre-pandemic levels, signalling a resurgence of the real estate sector; investments based on PLI have started to pick up; EVs and renewable energy sources are experiencing ongoing support and investment; supply chains are being expanded as national security considerations take precedence over economic productivity.

Challenges ahead that can adversely affect Capital Market sentiment

There are concerns for India, as core inflation remains at 6% YoY, with many items showing no signs of slowing down. Experts believe that inflation is likely to ease in FY24. It is anticipated that revenue expenditure will surpass the budget estimate (BE) due to increased spending on MNREGA and subsidies. The current account shifted to a deficit (1.2% of GDP) in FY22 and is expected to widen further to 3.3% of GDP in FY23, and reach approximately 3% in FY24. This exerts pressure on the Rupee and can cause instability in the stock markets, as it impacts interest rates, inflation, and fund flows.

What global factors can impact the Indian Capital Markets?

There are multiple global factors (beyond India’s control) that can affect the Stock Market in the country. These include the price of Brent Crude, the performance of the Rupee against the USD, actions of the US Fed, recession fears, geopolitical tensions, global pandemic, etc. 

Also ReadWant to read about Market Insights

Personal Finance: Where should investors invest in 2023?

The report, ‘Annual Outlook 2023: Beginning Of A New Era’ by ICICI AMC, focuses on investment trends in various asset classes, including gold, global and domestic equity markets, and cryptocurrencies. Here are the key points from the report.

Debt/Bond Markets Make a Comeback in Fixed Income

According to ICICI AMC's 2023 annual outlook report, debt/bond is set to experience a resurgence in 2023, while the Indian equity market is expected to maintain its value despite negative returns in major equity markets across the developed world.

Valuations in the Indian Equity Market Stay Elevated

The report (above mentioned) indicates that the Indian equity market yielded a 5% return, in contrast to negative returns in most of the world's major equity markets, including those in the US, France, and Germany.

The report states that as of December 1, 2022, National Stock Exchange data shows that the price-to-earnings (P/E) ratio for the Nifty 50 Index was slightly higher than the average of 18.9. Additionally, the price-to-book (P/B) ratio was also slightly above the average of 2.9.

Gold May Shine in 2023

A recent report by ICICIdirect suggests that after a highly volatile year in 2022, gold prices may reach their all-time high of Rs 62,000 in 2023. The report predicts that this increase will be driven by a weakening dollar, as the US Federal Reserve is expected to halt interest rate increases in early 2023 and potentially even lower them in the fourth quarter of 2023.

Also Read: Want to know about Investments

Backed by strong economic performance as compared to other global economies, Indian Capital Markets are expected to perform strongly. Geopolitical situations, global pandemic, high inflation rate, and low growth in global economies are likely to affect the Indian economy and Indian Capital Markets.

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

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