FII inflows are returning to Indian market and the best of FII flows are yet to come, with their positive shift for Indian equities in the fag-end of 2022, says YES SECURITIES in their year-end and 2023 outlook India Market Strategy report. YES SECURITIES research suggests that Nifty will tend to move to a new high over the next 12 months. India holds a concrete advantage over other markets and India's manufacturing will gain from production-linked incentives and global re-shoring.
According to the report, India's resilience to global turbulence is amply manifested in its outperformance. The moderated retail participation in the market (owing to decreased demat accounts) suggests that market is not in an overheated zone. In such a scenario, heavyweight stocks like RIL, Banks, and IT Services look attractive.
Both US and India are neither in a banking bubble nor a property bubble. The report states that demand is not an issue, we are witnessing a blockage of the existing supply and the situation is not suggesting a stagflation. Contrary to popular belief that stagflation implies high inflation and low growth, YES SECURITIES measures it as high inflation and high unemployment. However, unemployment is low in around the globe showing signs of recovery.
The report also says that central banks will pause on rates soon while governments will boost growth by offering stimuli through infrastructure spending, and loan guarantees, among others. It also hints that RBI will not necessarily raise rates to curb inflation, but to match Fed-raising rates. In this regard, YES SECURUTIES sees a 0-25bps hike by RBI to 6.25-6.50% Repo level.
In this inflationary environment, YES SECURITIES expects an increase in Indian household consumption by 46% to Rs.191trn by FY26, in comparison to FY22 levels. It is structurally placed on a strong footing, as India has an advantage is in terms of higher GDP growth driven by factors such as peaking inflation, strong balance sheet of corporate India, stable property market, etc. A steady transition towards clean energy and renewables will drive further growth (India EV Marketshare has grown from 0.5% in 2018 to 4.7% in 2022).
Average income of a household to jump from INR 6.8 lakhs in FY22 to INR 9.5 lakhs in FY26, says YES SECURITIES in the India Market Strategy report. Additionally, it also suggests that Gen Z and Millennials will drive consumption.
YES SECURITIES is bullish on the equities and the Indian stock market has shown remarkable resilience throughout major parts of the last three years. During Nifty's journey to a new high, markets tend to be sector agnostic, however mid-cap and small-caps tend to do much better than the Nifty.