Benchmark equity indices BSE Sensex and NSE Nifty are all set to bid adieu to the financial year 2022 with gains of 19 per cent. The 50-share NSE Nifty index advanced 2,807 points to 17,498.25 on March 30, 2022 against 14,690.70 on March 31 last year. Likewise, the 30-share BSE Sensex gained 9175 points to 58,683.99 during the same period.
Select market watchers believe that investors should rationalise their return expectations from the next financial year as easy money making is more or less behind us. Emkay Global Financial Services believes that Nifty may scale the 19,000-mark by March 2023, suggesting an upside of nearly 9 per cent from the current levels.
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Harshad Patil, executive vice president and chief investments officer, TATA AIA Health Insurance said, “Given the heightened volatility caused by the geopolitical tensions resulting in a surge in commodity prices and thereby impacting earnings in the near term, we believe that the markets may remain range-bound and might regain momentum post the easing in the geopolitical tensions and a subsequent softening in inflationary pressures.”
Going ahead, the key risk factor going into FY23 is the possible escalation of geopolitical tensions from already elevated levels, which could impact global growth, weaken global trade, and might disrupt global supply chains. This could further add inflationary pressures on a host of commodities and moderate the consumption demand.
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Considering the present market scenario, Patil said, “We believe that investors need to scale down their return expectations in the near term and expect low double-digit returns from the overall market in the next financial year.”
Vinod Nair, head of research, Geojit Financial Services said, “Sensex and Nifty may rally 5 per cent to 10 per cent return in FY23.”
The pace of interest rate hikes by global central banks, inflation trajectory and earnings growth outlook are some of the other factors that will drive the market in the next financial year.
Rahul Shah, co-head of research, Equitymaster said, “If earnings do not go up as expected, we may see a muted growth in the stock market in FY23. It is very difficult to predict returns over a period as short as one year. However, I won’t be surprised if the returns come in much below the long-term average of 14 per cent-15 per cent.”
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Commenting on earnings growth, George Heber Joseph, CEO and chief investment officer, ITI Mutual Fund said, “Earnings of Nifty companies can get impacted because of the higher energy prices and lower growth rates in the economy. Therefore, the earnings growth can be lower by 5 to 8 per cent, according to our internal estimates.”
Aishvarya Dadheech, fund manager, Ambit Asset Management added that the current geological standoff will have far-reaching implications on the global trade and economy, and the market will react to how it will unfold in coming times. More than war, it’s the sanctions that will drive commodity prices.
“Commodities prices are less likely to see a secular downturn even after war subsides, as sanctions will continue to disrupt the global supply chain. This disruption will continue to fuel inflation in the coming times and will dent the earnings growth of the companies eventually,” Dadheech said, adding investors must stay with companies that can protect their turf or which are least impacted by ongoing crises.
