The year 2023 is likely to be a volatile year with a roller coaster ride for the domestic equity market, according to Kotak Mutual Fund. Therefore, it believes that allocation between debt, equity, real estate and commodities is the key. In the ongoing calendar year, the benchmark BSE Sensex has gained over 7 per cent to 62,533.30 on December 13, 2022 from 58,253.82 on December 31 last year. On the other hand, the broader indices BSE Midcap and Smallcap gained 5 per cent and 1 per cent, respectively.
The money manager said that today when the state of the world economy has deteriorated, India stands out like an oasis in the desert. If you look at the headlines today, many are positive. However, high inflation is impacting growth. Therefore, it is not the time to be leveraged in equity.
“This is the time to maintain a neutral allocation to equity and use any correction as an opportunity to enter. We suggest marginal overweight to large cap, and marginal underweight small and mid-caps. An equal allocation to equities as an asset class,” Kotak Mutual Fund said in a release while mentioning top themes which may also benefit investors going ahead.
1) Real estate and home improvement
The next theme that Kotak Mutual Fund believes in is the real estate and home improvement theme. In order to ride this revival in residential real estate they are quite positive on the home improvement space. “We believe in the demand momentum revival. Real estate and home improvement sector will benefit from both primary and secondary market demand,” Kotak Mutual Fund said.
2) Defence, railways and infrastructure
The centre’s allocation to roads, railways, defence has gone up in double digits. India’s defence exports stood at a record Rs 14,000 crore in 2021-22. “As per media reports, the government plans to sharpen its focus on infrastructure growth in the coming Union budget by allocating 30 per cent more funds for the roads ministry to speed up construction to more than 50 km of highways daily,” Kotak Mutual Fund said.
3) Penetrating financial services
The asset management company added that the domestic financial services space seems to be in a sweet spot as foreign investors have made a net investment of Rs 14,205 crore in the sector in November amid strong credit growth and a manageable non-performing loan portfolio.
4) Manufacturing
Kotak Mutual Fund sees a structural push to manufacturing coming from the China+1 strategy (a strategy in which companies diversify their businesses to alternative destinations other than China), and PLI schemes and the next decade may probably see the rise of India’s manufacturing sector, filling the missing piece in India’s growth puzzle. The emergence of the Europe +1 theme due to the looming energy crisis in Europe would bode well for India as it becomes an attractive investment destination given its lower cost advantage and macro stability of the country.
5) Strong becoming stronger
Across industries such as banks, steel, cement, NBFC and aviation, the country is seeing consolidation resulting into big companies becoming bigger and strong companies becoming stronger. “Survival of the fittest is the law of nature. It’s equally applicable in the corporate world,” Kotak Mutual Fund said.
6) Rural revival
The push for infrastructure development and local manufacturing are going to directly help the rural income levels. Be it the development of roadways, setting up of new plants and expansion of manufacturing capacities, these projects are set to happen in rural areas only. “This will not only create jobs but will also boost consumption. The higher MSP allocation would go a long way in helping drive consumption of FMCG products in the hinterland. This would be highly beneficial for companies with a strong rural footprint and would help drive growth for the consumer products industry,” Kotak Mutual Fund said.
