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Despite the disruptions brought about by the pandemic in late 2022, we remain confident that the market in 2023 will not be as tumultuous as it was the previous year, feels Dr Mohit Batra, Founder & CEO MarketsMojo.

MarketsMojo is a platform where members can get advisory on stocks based on various parameters.

In an interview to Mint's Rakshita Madan, Batra said he likes IT, pharma, infra and defence themes for 2023. Here are edited excerpts from that e-mail interview:

Q. Can Indian market continue to outperform global peers in 2023? How do you see the situation in the backdrop of the macro headwinds like high inflation, global slowdown/recession, geopolitical uncertainty?

A. We anticipate that India's stock market will remain on an upward trend as the looming threats of 2022 wear away and are replaced by favorable conditions in 2023. For example, if inflation levels decline, global central banks could stop increasing rates and possibly even cut them in the second half of the year. On top of that, the reduced gap between supply and demand should help further reduce inflation levels.

In 2022, the stock market was volatile due to a variety of reasons. These will act as tailwinds to give the market an upward momentum in 2023 as inflation and interest rates decrease. Despite the disruptions brought about by the pandemic in late 2022, we remain confident that the market in 2023 will not be as tumultuous as it was the previous year.

Q. Which themes do you feel could be winners this year?

A. IT: We have an optimistic outlook for the IT sector, even though it may seem out of the ordinary. We are hopeful because we anticipate employee retention rates increasing and companies being able to garner higher prices for their products and services. What makes this opinion even more positive is that the negative parts of this sector have already been priced into the market, creating a favorable risk to reward ratio.

We foresee IT to perform better in 2023 due to diminishing supply-side issues, IT spending budgets and the return of growth. The weakening of the rupee will begin to reflect in profit margins. Additionally, with the recent share price drops, there are now increased investment opportunities due to more attractive valuations.

Pharma: The pharmaceutical industry in India is showing steady growth and the value of its stocks has settled, making it an appealing option for investors soon.

Capital Goods/Infrastructure: Since 2008, sectors such as infrastructure and capital goods have not seen great results. However, the current capacity utilization rate of 75% indicates that new capital expenditure will come about, particularly due to the upcoming elections in which the government will likely be keen to showcase projects that have been completed. Additionally, if interest rates fall, the outlook for capex should also improve.

Defence: We are highly optimistic about the defense sector, as the Indian government is now giving importance to both domestic defense requirements and defense exports. This is a great opportunity to go beyond the Atmanirbhar Bharat mission and make India a successful exporter of defense products. We strongly encourage our subscribers to invest in Indian defense stocks listed on our Mojo list.

Q. What are your thoughts about the new-age tech companies that recently got listed. Paytm, Nykaa they have been very volatile and now Mamaearth will be launching its IPO. Are they attractive? Which one do you like?

A. It is impossible to predict how much Mamaearth will price its IPO at as the merchant banker will decide closer to the date. Many people are assuming it will be set high, but it is likely that the company will not go through with this as there has been a lot of backlashes on social media. Companies such as Zomato and Paytm have already seen their valuations drop after listing, so there is a worry that the same could happen with Mamaearth should they opt for a high price. No decisions have been confirmed at this stage as we await a confirmation from the company and its merchant banker.

Companies such as Nykaa, Paytm, and Zomato have been adversely affected due to a lack of risk-on strategy in the market. Similarly, tech-driven companies in the US have also gone through a similar phase. However, we anticipate that when risk-on strategies are adopted, tech companies that seen an erosion will see value bank occur at a lower level. It is important to note that we are not taking sides or making any recommendations on Nykaa, Paytm, or Zomato.

Q. What are your expectations from Budget?

A. We assume that the government will persist in following their policy decisions and keeping the fiscal deficit in check. Here are my Budget expectations:

- Maintaining the continuity of reform strategies, continuing with the already-established fiscal deficit trajectory, and providing tax relief to lower and middle classes to increase their disposable income. Additionally, the application of indexation on the grandfathered price of long-term capital gains should be taken into consideration in order to lower the capital costs incurred by investors.

- In the past thirty years, attempting to predict the decisions of a finance minister has proven to be an impossible task and often leads to drastic market reactions when these expectations are not met. However, the current budget will likely keep the government's reform agenda in focus, as it prepares for the upcoming general election.

Q. Top IT companies are done with their earnings. What did you make of them? Is it time to bottom fish? Which ones do you like?

A. The IT sector showed a decline in performance last year due to an assortment of reasons, however, things appear to be changing for the better. Yes, Europe appears to be causing concern, but not in the way that a doomsday scenario would. Companies such as Infosys, on the other hand, have revised their revenue guidance, and none have issued a distress call on margins.

TCS, in particular, mentioned that its margins for the March 2023 quarter would be higher than December 2022 quarter. This is encouraging news and seems to indicate a possible surge in the IT sector's performance. Additionally, the sector has done well in comparison to popular indices like the Bank Nifty, suggesting that this is a profitable area for investors.

Q. Banking stocks, especially PSU banks, have run up a lot. What are the factors driving them? Is there more steam? Which ones do you like?

A. It appears that there might be some short-term momentum left in the stocks of PSU Banks, potentially lasting a couple of months, however this is not a buy and hold strategy for the long-term. Due to their lack of technology investments, PSU Banks may lack the same success that some fintech companies have found, making it difficult to sustain any rally over a two-year period.

Q. Can you take us through MarketsMojo’s stock research process?

A. At MarketsMojo, we use millions of data points to analyze every listed stock with an endeavor to help our members choose the right stock. The analysis is broken into two distinct categories; Long-Term Drivers, which cover Quality and Valuation, and Near-Term Drivers, which account for Financial Trend and Technicals.

We rely on company-reported numbers as the basis of our quantitative research. We believe this approach eliminates bias and prejudice that often come with subjective opinion. We may miss some potential opportunities, but by focusing on numbers we can be confident in the ones we do identify.

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