The trending narrative post the Budget 2023 proposal is that the Budget is disincentivizing savings. The argument goes like this: if the Budget is nudging individuals to move to the New Tax Regime, it likely means that it may eventually phase out many of the deductions available under the Old Tax Regime. Tax incentive is a major consideration for Indians to save.
In this final budget before the elections, there is little by way of big-bang announcements. There are, however, several announcements in the Budget 2023 that do bear implications. There are two aspects to the Budget impact – on one side, there are the provisions that impact your investments and taxes specifically. On the other, there are proposals that have a bearing on prospects for different sectors. Therefore, we’ve broken down our Budget 2023 analysis along these lines.
With popular NBFCs such as Sundaram Finance, HDFC and Bajaj Finance revising their deposit rates in the past year, FD investors can finally look forward to better returns, after a long drought. Rising demand for loans in an improving economy, is forcing NBFCs to compete actively for deposits once again, prompting even top-rated ones to roll out deposit schemes for longer tenures of 4 to 5 years with ‘special’ rates. Sundaram Home Finance is offering 7.65% on its 4-year FD and HDFC has a special offer of 7.6% running its 45-month Sapphire Deposit scheme.
But are these rates special enough for you to lock in your money for longer tenures of 4 or 5 years?
We had, in mid-2021, initiated a buy call on a stock that was reinventing itself from a supplier of diesel engines into an EV player. It was an early call we’d made on the EV boom, which appears well-timed as electric 2-wheeler sales jumped from 16,000 units in 2018 to 150,000 units in 2021 to a whopping 615,000 units in 2022!
With the EV 2-wheeler market now clearly segmenting itself, there is more clarity on how competition and market share is shaping up. The EV 2-wheeler industry is also going through regulatory tightening.
There are more theories on what works in stock investing than there are listed stocks. Each one seems to be successful at some point in time. However, there is still no single universally applicable formula. I am still in search of that magic formula. If any of you do find one, please post it in the comments section.
But if there can be said to be two warring camps on the right approach to stock investing, these are usually fundamental analysis and technical analysis. Both have loyal camps of followers who swear that their method works best.
This leader in engineering and R&D services is differentiated from other large IT players and is focused on high growth opportunities.
In one of our stock recommendations last year, we analysed a company that was moving from ‘tonnage to technology’. We spoke briefly about the company transforming itself from a manufacturer of forged components to a supplier of products, systems and assemblies to defence and electric vehicles. The stock delivered 27% since our call (index 8.5%) and we retain a buy. In this report we detail further on the above opportunities based on the information that the company shared with analysts last month.
The list of top performing equity funds for the past year features a couple of unusual entries. With a return of 18-21 per cent, CPSE ETF (managed by Nippon India Mutual Fund for the government of India) and the Bharat 22 ETF (managed by ICICI Prudential Mutual Fund) are top rankers among equity funds.
This has many investors asking if they should add these passive funds to their portfolio. The portfolios of CPSE and Bharat 22 ETFs are made up of the PSU oil, energy and financial giants which are the flavour of the season. These ETFs’ costs are ultra-low because they are used as divestment vehicles. Both ETFs would also seem to be ‘value buys’ if you go by their ultra-cheap valuations. The CPSE ETF trades at a portfolio PE of 7 times and Bharat 22 ETF at about 11 times. This is a fraction of the current Nifty50 PE at over 21 times.
But does this make them worth betting on? There are five good reasons for long-term stock investors to steer clear of these ETFs.
In our Prime Equity outlook in 2022 we said “We would expect any correction triggered by global rates to take the Nifty 50 down to the 12,500 to 15,000 range. In this range, investors should deploy cash and swoop in on buying opportunities rather than develop cold feet!”.
The equity market world over did see a correction in 2022 along these lines and as geo-political factors took hold. Indian markets too, experienced a rout in the first half of the year hitting close to our predicted range at 15,200 by mid-June.
Even so, India did a lot better than its emerging market peers. The Nifty 50 closed the year on a positive note, with a modest 4% return. Simply buying the Nifty 50 would have delivered a good 18% from June until December 2022. Our own stock picks delivered well in 2022, too.
But with global recession on the cards, still high Nifty 50 and a hostile rate scenario, can 2023 be better than 2022? For Indian markets, there are some key trends that we think can play out. We look at where the Nifty 50 could be headed, and where opportunities lie.
“Is this a good time to invest in the market?” This is a question that many of you ask us when you want to deploy additional money. Gauging market mood is never easy and this is often done mostly by short-term traders. When investing for the long term, we typically tell you that it is best to invest in phases and avoid trying to time the market. Investing in phases (or call it SIP) and holding for the long term can help contain downsides and it is a proven strategy.
In the previous update on the targets for the Nifty 50, the expectation was that the index could head to the next target at 19,100. Contrary to expectations, the index has been in a correction phase in the past few weeks. In today’s report, thus, we try to assess both the short-term and the medium-term outlook for the Nifty 50 index.
After bungee jumping off a cliff, it is good to wait for the adrenaline rush to wear off. Indian bond markets are in exactly this situation now. After falling sharply as rates rose, bond prices are pausing to take a breath. In our debt outlook last year we expected rates to continue their upward climb and recommended strategies to play this. During the course of 2023, we think interest rates could top out and stabilise. We tell you what this will mean for your debt portfolio.