Markets closed the 2021-2022 financial year on a strong note with frontline indices S&P BSE Sensex and Nifty 50 gaining 18 per cent and 19 per cent respectively.
After markets posted a double-digit return for the second consecutive financial year, analysts expect the next 12 months to stay turbulent as higher inflation and rising interest rates cloud bourses.
Analysts believe, inflationary pressures are expected to cast a shadow on India Inc earnings this fiscal year, despite reopening of economic activity.
Corporate profitability remains at stake as companies hesitate to take price hikes. Given this, several brokerage firms have downgraded earnings outlook as companies expose themselves to increased margin pressure.
Morgan Stanley has slashed earnings growth forecast by 8 per cent for FY23.
Meanwhile, Motilal Oswal too, has cut earnings estimate for automakers due to fuel price hikes.
Vinod Nair of Geojit Financial Services warns margin pressure and muted consumer sentiment to lower FY23 earnings roadmap.
Moreover, with global central banks increasing interest rates, India too, will be walking a tight rope to control inflation and sustain durable growth.
The Reserve Bank of India will hold six monetary policy committee meetings in FY23, starting from April 6 to 8. Though analysts expect the central bank to defer rate hikes for the latter part of FY23, investors will watch out RBI’s commentary on inflation forecast.
On the other hand, after a blockbuster FY22 for the primary markets, FY23 will see over fifty companies heading to bourses to raise funds, including the much-awaited LIC IPO.
That said, a section of analysts expect equities to remain a favourable bet in FY23 as markets have priced in the bad news.
Manish Jain, fund manager at Ambit Asset Management believes strong rural demand and credit growth will steer markets forward.
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