Outlook for 2023: We have a base target of 18,000 for Nifty50, says Vinod Nair

Supply constraints slowed the global economy, and investment patterns turned cautious, driven by global risk-off. Drops in liquidity affected the performance of many Indian sectors, especially mid- & small-caps.

For the global market, 2023 is expected to be better than 2022. Because the recession is expected to be short-lived and not structural in nature. However, the ongoing aggressive monetary policy will manufacture a recession around the globe, bringing volatility during the year.

Despite this, at the same time, the job market will remain healthy due to a lack of labour availability and an increase in the world’s operational capacity as supply constraints reduce.

Resultingly, the monetary policy will reverse in the later part of 2023, and the global economy will stabilize, correcting the ongoing imbalances. This will ignite positivity in the future global stock market during the year.

Regarding India, the cautious monetary policy is expected to continue in H1CY23, and the broad valuation persists at a premium, which is a hindrance in the short to medium term.

India’s valuation will reduce to a long-term average due to the risk of shuffling by foreign investors into other EMs and a slowdown in domestic earnings growth.
Overall, we can expect a modest positive average return on an annual basis, as India is an essential part of the emerging markets, which will benefit — though we can underperform on a comparative basis.

Developed and other emerging markets are expected to perform well, because they are relatively cheap and recessionary factors have been adequately accounted for, for a rapid fall in inflation. A change from hawkish to neutral monetary policy, and stability in the economy are the factors that can swing the outlook for equities on an optimistic note.

Whereas, in the fallout, the mild, non-structural recession may enlarge into a fundamental problem. The interest rate or bond yields continue to stay at elevated levels in 2023, and Covid’s zero-tolerance policy sustains in China.

We have a base target of 18,000 for the Nifty50 as of December 2023, with a peak and trough of 21,000 and 15,900, respectively. The fair target is based on the view that the premium valuation of India will moderate in 2023, from above 20x P/E in 2022 to 17x in 2023.

This is in anticipation of a slowdown in domestic earnings growth and a better outlook for other emerging economies.

We believe that some sectors, like PSUB, IPOs, and new-generation companies, did well in 2022 due to tactical gains, which are unlikely to sustain in the medium term.

We also recommend reducing exposure in interest rate sensitive sectors like banks, NBFC, auto, reality & infra, which have done well in 2022, as the transmission of interest rate garners in 2023.

Weightage lending rate of private banks has increased by only 90bps, compared to 225bps increased by RBI in 2022.

Sectors like IT, Pharma, and Chemicals have not done well in 2022, which we presume is a good opportunity for long-term investors to accumulate for long-term gains.

They may have volatile prices in H1CY23 due to recession anxiety and high raw material costs. But much of the issue is factored into the prices, though valuations may moderate in the near term. The business outlook is solid for long-term gains.

(The author is Head of Research at

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