Indian stock markets have been witnessing consolidation for the last six months after the phenomenal run for nearly two years. The key indices may spend some more time at these levels before resuming the trend, Ajit Mishra, VP-Research, Religare Broking, told Surbhi Jain of FinancialExpress.com. He expects BSE Sensex to test 64,000 and Nifty 50 to touch 19,500 in the current financial year. Mishra said that even as markets are witnessing the signs of revival on the back of easing geopolitical tension and reopening, factors such as the quantum of US Fed rate hikes, higher inflation will continue to keep markets volatile. Here are edited excerpts from the interview.

Where do you see the long term potential for a market like India for a five to seven-year view?

As per our data since 2000, investors having a time horizon of 5 years or more usually get positive returns. And, since the stock markets largely reflect the economic potential, we expect tremendous growth, however the potential leaders may change, with the rapid change in the economic drivers.

Crude oil is now down from $130 odd, where do you see it going in the next couple of months?

Crude oil prices have eased considerably after testing multi-year highs of around $130.50/bbl in March 2022. The news of peace talks between Russia-Ukraine, key consuming nations pledged to release 240 million barrels of oil from their strategic reserve and demand concerns due to fresh COVID cases China helped cool-down oil prices. However, prices still managed to settle into positive territory last month, with a fourth consecutive monthly gain.

Moving ahead, oil prices may remain in a corrective mode for some time and could test $85-80/bbl levels, but the overall undertone is still positive as the latest release from emergency stocks may not fully offset supply lost from Russia, while no new supply is in the pipeline. Even the talks to revive the Iran nuclear deal have not made much progress. Meanwhile, the European Union is considering a ban on Russian oil, which will further tighten the supply. We can expect prices to remain soft in the near term but demand is likely to re-emerge on lower levels close to the $80-85/bbl levels and crude prices could again edge higher towards the $125-$130/bbl hurdle zone.

What is your outlook on BSE Sensex, Nifty 50, Bank Nifty, Nifty Midcap 100, and Nifty SmallCap 100 for FY23?

Markets have been witnessing consolidation for the last six months after the phenomenal run for nearly two years. And, it may spend some more time here before resuming the trend. Though we are seeing signs of revival on the back of easing geopolitical tension and reopening but factors such as the quantum of US Fed rate hikes, higher inflation will continue to keep markets volatile. Also, high commodity prices would impact the quarterly earnings ahead. We thus expect volatility to remain high and investors should keep their focus on specific stocks/themes.

Amid all, the benchmark indices, BSE Sensex and Nifty 50, have the potential to test 64,000 and 19,500 respectively in FY23. The banking index has been underperforming the benchmark and we expect the scenario to improve in FY23, with lower provisioning and improving asset quality. The broader indices, midcap and smallcap, outperformed the benchmark in FY22. And, we expect the same trend to continue as there are companies within these spaces that are at a decent valuation, and have good growth potential.

What are the key themes, and sectors that could get more attention in FY23?

We believe banking, IT, defence and infra-related themes may perform well and can earn good returns. Further, credit growth picking up pace, better valuation and improving balance sheet bodes well for banking & finance, while strong government focus and higher capex towards defense and infra will drive growth for both the sectors. Lastly, for IT, a strong deal pipeline and focus on digitalisation and cloud will continue to drive growth.

Besides, new-age sectors like Consumer Tech, FinTech and Renewables would start contributing meaningfully as more companies from these spaces start getting listed on the bourses and the existing companies are transforming their businesses. However, investors should keep watchful of their valuation before investing.

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