Constructive on rural consumption, home auto and healthcare: Neelesh Surana of Mirae Asset

As we go into 2023, we anticipate home financial restoration to broaden. Therefore, we’d be constructive on sectors the place financial restoration is incomplete, probably profit from disinflation in commodities and valuations are affordable.

Mixing these collectively, we’re constructive on rural consumption beneficiaries, home auto and healthcare sectors.

We anticipate restoration in rural consumption developments in 2023, benefiting from — higher winter crop; increased rural-oriented spending within the pre-election yr and early indicators of enchancment in non-farm employment. Thus, mass or rural consumption companies will profit.

Autos are but to completely return to normalcy, which obtained impaired within the final 5 years, pushed by excessive inflation and thus low actual wages, supply-side challenges and margin strain, given unstable commodity prices, and so on.

With macro uncertainty more likely to persist in 2023 as properly, healthcare as a sector ought to do properly, given its defensive traits and affordable valuations.

What are the three sectors that you’re bearish on and the explanations?

We’re cautious on IT, metals and capital items sectors.

We might nonetheless be cautious on global-oriented sectors as development considerations are nonetheless persisting. In 2023, we anticipate considerations to shift from liquidity to development. Thus, for global-linked sectors, considerations are more likely to shift from valuations to demand outlook, which isn’t priced in sectors like Metals and IT.

In case of capital items we have now seen a wholesome run-up in shares over the past one yr with larger income visibility on the again of sturdy order pipeline and the give attention to infra development story, localisation, efficiency-led capex momentum and beneficial enter price/working leverage tailwind. Whereas we stay optimistic on the home infra development theme given the Centre’s infra push in addition to personal capex gathering steam throughout sectors, a lot of the firms within the sector proceed to commerce at stretched valuation and thus we stay cautious on account of valuations.

One constructive set off for the markets that you simply foresee for 2023

Easing of geopolitical tensions might assist restore normalcy in imported power price, which incorporates oil, coal and fuel price. This, in flip, might end in higher commerce steadiness and in addition want of central financial institution to guard forex.

One adverse set off you visualise for 2023

There was vital financial tightening in 2022, which may have influence with lag in 2023, significantly within the first half within the type of development slowdown. Ex-China, world development subsequent yr shall be near a recession. For now, it’s assumed to be a gentle recession, though any worsening of period of excessive rates of interest must be tracked.

Neelesh Surana is Chief Funding Officer of Mirae Asset Funding Managers (India). He has over 26 years of expertise in fairness analysis and portfolio administration.