Fixed deposits once again have emerged as an alternative investment option for investors after the recent hike in interest rates, said Rahul Arora, Chief Executive Officer, Nirmal Bang Institutional Equities. The market watcher also believes that the year 2023 will be a volatile year for the domestic equity market as there will be some economic impact of rising interest rates in India and the US. In 2022, the benchmark equity index BSE Sensex gained just 4 per cent as the geopolitical crisis between Russia and Ukraine, soaring inflation and outflows by foreign portfolio investors weighed market sentiment.
With an objective to tame inflation, the Reserve Bank of India (RBI) has upped the repo rate by 225 basis points since May 2022 to 6.25 per cent. On the other hand, the US Federal Reserve hiked interest rates by 425 basis points to 4.25 per cent-4.50 per cent.
In an exclusive interaction with Sakshi Batra of Business Today TV, Arora said that rising borrowing costs will impact corporate earnings. However, strong government spending over the next 12 months ahead of the general elections in 2024 will support the market. Stability in the crude oil prices, which surpassed a record $125 per barrel last year, is the biggest positive for India. At present, Brent crude is hovering in the range of $75-80 per barrel.
“All eyes will be on the Union Budget which will show how the government of India approaches towards fiscal deficit aspect. The year 2023 will be a year of two halves. Investors should stay cautious and patient,” said Arora.
How to make money in 2023?
Considering the ongoing slowdown in the US and Europe, Arora prefers domestic themes over those companies which have global exposure. At present, he prefers to stay away from information technology companies, while cement and infrastructure themes look attractive to him ahead of elections next year.
“Capital goods sectors may also do well as prime minister Narendra Modi extensively spoken about defence and manufacturing space. If the country may see a lot of projects, then rating agencies especially ICRA and CARE could also do reasonably well,” Arora said adding banks, domestic pharmaceuticals and chemicals space may also do well going ahead.
For stock-specific players, he advised market participants to zero in on Mahindra & Mahindra and Ashok Leyland from the auto space. “If you have a good winter crop and monsoon, I think a commercial vehicle theme will deliver a healthy return,” he said. He also believes that Tata Motors is the second interesting play. However, the company’s exposure to China is the only concern.
“We also like Hero MotoCorp in the two-wheeler space, Maruti Suzuki in the passenger vehicle category and HUL, Britannia and Dabur in the FMCG sector,” Arora said.
How to invest Rs 10 lakh?
While retaining his bullish view on the Indian equity market, he advised investors who are in mid-30s to put 60 per cent of their wealth in equities, 15 per cent in fixed income, 10 per cent in REITs and InvITs and the rest in commodities and gold.
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