Are Indian Markets Set for a Promising Finish in 2023?

We came across two interesting market updates this week.

The first one was about HDFC Bank and Reliance Industries. With effect from the week, the reverse merger of HDFC and HDFC Bank will result in the latter getting stronger from a fundamental perspective and also commanding a higher weightage than Reliance in the Indian benchmark index Nifty 50.

This is certainly a mean feat.

More than five decades ago, when HDFC came out with its initial public offering (IPO), the issue was undersubscribed, and the stock also listed below its issue price of Rs 100. The rest, as they say, is history. HDFC and HDFC Bank, today, rank amongst India’s top 10 valuable companies!

HDFC twins and Reliance are both superstars of the Indian stock market. They are both leaders in their sectors. And they’re contributing to India’s growth.

The companies have been an integral part of India’s corporate earnings. And they have been taking India to its next step and investing heavily in the country’s long-term growth.

Which brings us to the second interesting read…

A report states that Indian companies are expected to deliver their strongest earnings growth in Q1, as declining input costs bolster profitability.

This could also potentially be the best quarter for corporate earnings of the past seven quarters.

What gives?

India, a manufacturing superpower, has strived to be great.

India is slowly becoming the new factory of the world as multinational corporations move out of China and lay their base in emerging countries.

Earlier this week, the Tata Group announced they’re close to an agreement to acquire an Apple Inc. supplier’s factory as soon as August 2023. This is again a remarkable feat and marks the first instance when an Indian company would move into the assembly of iPhones.

For some time now, the biggest companies such as Samsung, Amazon and the likes have started manufacturing in India under Modi’s Make in India initiative.

No wonder industry experts are gung-ho on corporate earnings for the first quarter. They expect Nifty 50 companies to post strong double-digit growth in their earnings.

We saw the Q1FY24 earnings season kicking off with Tata Consultancy Services (TCS) results this week.

The company delivered impressive performance where the IT major posted a 13.5% year-on-year (YoY) growth in revenues, while the profits grew 16.8% YoY.

Going forward, market participants will focus on Q1FY24 earnings and management commentary.

But where do investors and traders stand in this trend?

India shines as an attractive destination for global investors in the current market environment.

The country is viewed positively for its improved business, favorable demographics, and a friendly environment for sovereign investors.

Positive movement continued in Indian equities in the month of June, with the Nifty up 3%. Mid-cap and small-cap indices outperformed large-cap indices and were up 6.3% and 7.7%, respectively.

It is widely expected that India will become the third largest economy by 2030. The country is being transformed with infrastructure getting in place, and offers steady growth, falling inflation, improving corporate earnings trajectory.

In a way, investors in Indian share markets are more optimistic.

Nevertheless, there are risks as well.

The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) highlighted increased concerns on inflation stemming from uncertainty in the monsoon turnout.

With increasing uncertainty on the monsoon front, risks to food inflation are skewed to the upside.

Further, the growth outlook also remains clouded amid adverse weather conditions weighing on rural demand, and the likely global slowdown.

All in all, we’d like to highlight that making predictions is complex, and no one can predict the market’s direction with 100% accuracy.

And that’s where diversification comes in handy. It plays a crucial role in mitigating risk. And it ensures investors can exploit potential opportunities while also safeguarding their investments.

An easy way to diversify your portfolio is to divide it into different parts with different asset classes and allocate fund allocations to them as per your financial planning.

Investors comfortable with having a higher risk-reward ratio can have a higher allocation for stocks. Start your journey by clicking here >>

If stocks are not the first choice, and you prefer safety over returns, you could look at gold.

Or you can simply start with a systematic investment plan (SIP) in mutual funds. Click here for more.

Only time will tell if the next couple of months play out how the market participants anticipate.

But until then, remember to trade and invest wisely, with time-tested strategies, and proper risk management measures in place.

For a more thorough market outlook, tune into the video below where our research team discusses stock and sector analysis for Q1FY24.

We’ll be back with another exciting story next week! Happy Investing!

Sources: Economic Times, BSE, Kotak Securities, Livemint Disclaimer: https://www.kotaksecurities.com/landing-page/researchreport-disclaimer/disclaimer.html