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Providing an outlook for Equity Markets in CY23 based on sectoral views and impact of macro scenarios, Tata Mutual Fund's CIO - Equities, Rahul Singh said that at current valuation premium, India's relative performance in short term and in 2023 becomes a function of what happens to the rest of the world i.e. shallow vs. deep recession in US/UK/EU and the pace of recovery in China post-reopening. 

“A shallow recession in US/UK/EU combined with slow recovery in China may be the best-case scenario for India as it can sustain India's valuation premium with limited impact on corporate profits. A deep recession can have follow through impact on Indian economic growth even though it will reduce the inflationary pressures from input costs. In contrast, a global rebound led by China would reduce India's valuation premium irrespective of strong domestic fundamentals," he said in a note.

Despite best efforts, short term moves in the portfolio stocks may not always make sense as risks arising out of global macros (extent and nature of recession, geopolitics) are inherently unpredictable. The portfolio construction therefore will have to make sure that it stays afloat in an uncertain period ahead of us, he advised, adding that, “In summary, our advise to investors in 2023 would be to: ii) Keep core allocation in Balanced Advantage Funds, iv) Exposure to schemes benefiting from broad-based economic growth & investment cycle."

Getting the discipline, coordination and breathing right will be key and not just moving the hands and legs faster and there will always be periods when running faster would deliver better results like in 2021 or 2017, Singh said while highlighting that chances of that appear less in 2023 as we enter higher interest rate regime.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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