Banking, infrastructure stocks among top themes for 2023: 5paisa.com

Banking, selective NBFCs, infrastructure and PSU themes are likely to be buzzing in the coming year 2023, Gagdani said in an interview to Mint’s Asit Manohar.

Here are the edited excerpts from that interview:

Both US Fed and RBI in their statements warned of inflation remaining on the higher side despite multiple cuts. Meanwhile, there are global economic growth concerns. How do you see fundamentals stacking domestically and globally in 2023?.

2022 was certainly a difficult year for the global markets due to the Russia-Ukraine war which had an impact across the globe. Some parts of the world were still dealing with the Covid outbreak while the inflation spiked in most of the countries, forcing central banks to hike interest rates sharply. Now as we are nearing the end of 2022, the recent inflation data has given initial signs of cooling off. However, we need to see further signs of cool-off in inflation to conclude that it has peaked and hence, central banks are still cautious on the same.

In our sense, although the pace of the rate hike has slowed down, the US Fed will not be in a hurry to pivot until it has significant proof of reversal in the inflation trend. So the first quarter of calendar year 2023 could continue to post challenges for the global markets as the corporate earnings also remain subdued and we might see ups and downs in this period. However, we expect the financial year 2023-2024 to be much stable and a gradual recovery to take place globally if inflation cools-off substantially.

Bank Nifty has been in an uptrend, what is driving the index? Has it peaked?

Over the last few years, the banking sector was dealing with high NPAs which was a major concern for the banking stocks. However, the trend has now reversed as the NPAs have reduced and our domestic credit off-take has been stable inspite of global headwinds.

The PSU banking stocks, especially, were trading at steep discount to their book value and hence buying interest was seen across in the last two-three months. Since we have already seen a decent upmove recently and the technical readings are overbought, we might see some profit booking in the short term. However, if one remains focused on long term, then the trend still remains robust and hence, one should look for buying opportunities within the banking stocks on declines.

IT stocks had a rough ride this year. Is this an early sign of a likely slowdown in 2023 or it’s an opportunity for bottom-finishing?.

IT space has underperformed substantially in last one year and this has been a global phenomenon. If we look at the Nasdaq index, it has seen a sharp correction from it’s all time high of 16120 to the recent low of 10088. Valuations for the Indian IT companies which were trading at premium have corrected and are now reasonable.

We believe that the price-wise corrective phase is behind us for most of the IT names. But until we see a resumption of uptrend in the Nasdaq, Indian IT stocks could undergo some time-wise corrective phase. So long-term investors can look to accumulate certain large cap IT names over next few months and strategize to buy in a staggered manner.

What are your preferred themes for 2023?.

Banking, selective NBFCs, Infrastructure and PSU theme are likely to be buzzing in the coming year 2023.

Nifty is set to finish higher for the record 7th year in a row. What targets for Nifty, Sensex and Bank Nifty do you see in 2023?.

Although we have seen a decent outperformance to the global peers, one should be reasonable in terms of returns expectations as the global economy is not out of the woods yet. Nifty could see some volatility and bouts of correction in the near term, but a sustained bull market could be seen in the later half of 2023. We expect Nifty to rally towards 20,700 followed by 22,000 during the later part of the coming year. In line with the same, Sensex targets are seen around 69,200 and 73,500 while Bank Nifty could rally towards 47,800 and 51,500. As the index moves towards our target zones, we would reassess post analyzing the corporate earnings and other data.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.