Global Market Outlook 2023
Wishing you a very happy and prosperous New Year 2023!
It is that time of the year when we sit down and take stock of the year that passed and make necessary amendments with new year resolutions to our life. This is no different for the markets either.
It has been a roller coaster ride in 2022! Year 2022 has been a great learning curve.We had Soaring inflation, aggressive hikes in key lending rates, the risk of a recession in the US and Europe and geopolitical concerns, which weighed down on the Global marketsand recovery never sustained for a long period.Many sectors took on the leadership role one after the other, but never consistently together. But the investor/trader who survived the roller coaster ride was the one who had a system and routine in place. Now the thing with routine is that it can get boring andpromptthe need to seek excitement in the market. And that is where we enter the market trap. Building and sticking to the system that helps us track all the asset classes on a broad level and becoming aware of the inter-market relationships playing out has always been the best way to survive any market condition. And that’s exactly what we intend to provide our readers today with the market outlook.
At first, we will look at the Major Global Indices Performance CYTD.
| Country | Indices | YTD |
|---|---|---|
|
North America |
DIJA |
-9.23% |
|
NASDAQ 100 |
-33.88% |
|
|
S&P 500 |
-19.99% |
|
|
Germany |
DAX |
-12.35% |
|
France |
CAC 40 |
-9.75% |
|
Great Britain |
FTSE 100 |
0.66% |
|
Russia |
RTS |
-39.18% |
|
Hong Kong |
Hang Seng |
-14.41% |
|
Japan |
NIKKEI 225 |
-9.37% |
|
India |
Sensex |
5.76% |
|
China |
Shanghai Composite |
-14.55% |
The above table makes it quite clear that Indian markets have significantly outperformed the Major Global Indices and we can expect the similar performance in 2023 despite continuing to have fundamental and economic fears. Let us understand why.
Nifty 50, continued its rally despite many market scares during the year and has been consistently trading above the short, mediumand long-term moving averages (as mentioned in the Chart A below) making case for a strong and sustainable uptrend.
Having said that, it is imperative to understand that market corrections are bound to happen even in the strongest of Bull cycles predominantly to shake out weak hands. However, the corrections tend to be sharp and short-lived in nature. Chart B below, indicates a divergence in the Nifty 50 price movement with respect to the relative strength of the price movement, thereby making a reasonably strong case for a correction. Now how deep and time consuming the correction will be, only time will tell. Sector and stock selection will be key. Expect PSU Banks, Capital Goods, Consumption and Automobile to take centre stage. Many leaders of the last decade may underperform/disappoint the investors as many of them have reached their cyclical peak and there is a reasonably high probability that they will underperform during the next major market rally.
India VIX, which is often termed as the fear Index, too does not show any concerns of a major market correction or volatility creeping in. In turn, it is indicating a much-subdued volatility and gradual upmove over a sustained period as evident from Chart C below.
Gold Outlook :
Now, let us turn our attention to other asset classes starting with Gold. We believe, Gold has a potential 18% to 20% upside, as highlighted in Chart D below, and is gradually breaking out of the consolidation and is headed higher. It is suggested that an investor has exposure to Gold whilst creating an asset allocation, both from diversification as well as potential investment returns point.Gold will certainly glitter!
USD/INR Outlook :
Although from the Chart E below it is clear that USD/INR Currency pair is trading in extended zones and should ideally correct resulting in strengthening of Rupee, the momentum speaks otherwise. Indian rupee was Asia’s worst performing currency in 2022 depreciating around 11.5% against the US Dollar on capital outflows by foreign investors. FIIs pulled out around ₹2.75 Lakh crores during the CalendarYear 2022. Dollar has strengthened amid Russia-Ukraine conflict, global slowdown and global inflation concerns which led to surge in the US bond yields, thus leading to appreciating US Dollar. We expect Dollar to strengthen in the forthcoming quarters, despite interim corrections, and finally head towards the targets of 85 and 89 at which point in time and price, we may see the end of Bull Cycle in USD/INR currency pair ultimately resulting in strengthening of Rupee,against the greenback, to levels which the market witnessed between 2015 and 2019.
Crude Oil Outlook :
With Surging COVID-19 cases in China, Brent Crudehas fallen more than 15% since early November. Leading analysts forecast that the oil demand will grow significantly in the second half of 2023, driven by the easing of COVID-19 restrictions in China, the world’s largest crude oil importer, and by central banks adopting a less aggressive approach on interest rates.(source : Reuters)
Dow Jones Outlook :
Conclusion:
The key factor is that despite the global slowdown threats, Indian economy and markets continue to display strength. With improving consumer sentiment, increased annual growth rate across various sectors, recent trends in commodity prices and fair expectations from the Budget which is around the corner, India is expected to display greater (economy) strength as compared to other major economies. This confidence booster will certainly reflect in the market price action. As an investor it is vital to stay guarded but continue to believe in the Indian Market Outlook and stay invested and not be too much troubled by the interim shakeouts and correction which continue to rattle the markets frequently. It is ideal to position ourselves to be able to buy on dips to take the advantage of the rupee cost averaging. Don’t be too excited to Buy into the smallest of corrections. Identify the major support/demand zones to top up the investment.Ultimately, turning our biggest fear into our advantage. Maintain your asset allocations, stick to your financial plan and as always, consult your financial planner for all major financial decisions. Happy and fruitful Investing!
