Prediction on Indian Stock Market 2023

Introduction

Predicting the performance of the Indian stock market, or any stock market for that matter, is a complex endeavour. Stock markets are influenced by a wide range of factors, including economic conditions, corporate earnings, government policies, global events, and investor sentiment. Moreover, unforeseen events and developments can have significant impacts on market performance. 

Considerations

The performance of the Indian stock market is influenced by a wide range of factors, both domestic and international. These factors can have varying degrees of impact on market performance. Here are some key factors that determine the performance of the Indian stock market.

• Economic Growth

• Interest Rates

• Inflation

• Government Policies

• Global Economic Factors

• Corporate Earnings

• Foreign Institutional Investors

• Foreign Exchange Rate

• Monsoon and Agriculture

• Regulatory Changes

• Corporate Governance

• Global Markets

• Geopolitical Developments

• Market Sentiment

• Liquidity & Market Structure

Economic Growth:

As per the reports by International Monetary Fund (IMF), the global growth in FY 2023-2024 will be led by India and China. According to the economic survey of India (FY2023), India to witness GDP growth of 6.0 per cent to 6.8 per cent in 2023-24, depending on the trajectory of economic and political developments globally. The rising population, expanding middle class, cheap manufacturing cost, skilled labour, increased purchasing power has resulted in the GDP growth of India, this has resulted in increasing investors confidence on Indian Stock Market, thus leading to buying activity which helps in better performance of the Indian Stock Market Indices. 

As per the NSE’s Macro Review as on 1/9/2023, India’s first quarter GDP growth for FY2023 -2024 came in at a four-quarter high of 7.8% which will in turn will have its positive effect on the performance of Indian Stock Market in 2023.

Global Factors:

While the US and India have been holding firmly, the European economy along with China has slowed down materially and the continuing conflict between Russia and Ukraine, it is believed that the global growth will decelerate even further, leading to increased inflation and peak in interest rates in next few quarters.

One of the main factors for the better performance of Indian Share Market, is due to the positive performance of the US Stock exchange Indices. This has boosted the investor confidence and participation in Indian Stock Market.

Government Policies: 

Government policies and regulatory changes can have a significant impact on specific sectors or industries within the Indian stock market. Taxation, reforms, and policy decisions can lead to market volatility. India’s upcoming state election in 2023, will be a guiding factor for general election in 2024.This general election will have major role in directing movements of the Indian Stock Market. Any shift in policy decisions and any signs of potential political instability will also act as major indicators on the future of Indian Stock Market in 2023.

Stock Market Performance:

NSE 50 and BSE SENSEX have marked their all-time high in Q1 of FY2024, thus the outlook for Indian Stock Market 2023 will be promising to be bullish.

Interest Rate 

When inflation increases, RBI increases the interest rates which divert the investors from investing in stocks (risk) to invest in risk free fixed income deposits. Generally, interest rates and Indian stock market performance are inversely proportional.

The Reserve Bank of India increased its benchmark policy repo at 6.5 percent for the second consecutive meeting in June 2023 to ensure inflation stays within the central bank's 2-6% target range without hampering growth. This will, in turn affects the performance of Indian Stock Market.

Inflation

The RBI projects the headline inflation or the CPI at 5.4% for 2023-24. The real GDP growth is projected at 6.5% with Q1 at 8.0% during the period. Though thew core inflation is moderate, the spike in food inflation has accounted to the elevation in inflation trajectory.

When compared to previous quarters, RBI has intervened and has better success in taming inflation with relatively lesser policy tightening and considerably lowered the inflation in June 2023 was 4.8%. These affects the performance of Indian Stock Market in 2023.

Central Banks:

Central Banks like RBI, US Fed and European Central Bank have done with its rate hiking cycle for the Q1 FY2023. Currently, the global growth has slowed down due to various global factors, central banks in this case, central banks would decide upon easy- money (interest rate cuts), over coming quarters which would make easier for businessman and consumer to obtain loans. This will help the corporates to perform better.

Prediction

In the future, as the delayed impact of the global synchronous tightening plays out, the belief that global growth will decelerate even further. As the global growths slow down, inflation will give way to growth as the primary concern for the policymaker. Hence, it is believed that the global interest rates will peak and the reverse cycle would start over the next few quarters.

India shall remain structurally constructive on the Indian Stock Market due to various supporting factors like macroeconomic stability, visibility of 7% + growth for long period, corporate transparency, clear banking system balance sheets, favourable demographics. The outlook is positive for the Indian Stock Market in 2023 based on the earnings -growth prospect on Domestics based sectors and the increase in momentum is witnessed in other various sectors.

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