The roller-coaster ride of a year has finally come to an end, with the Nifty moving up by 2% last week. The Nifty ended the year with a paltry 3% rise.
With a low of 15,294 and a high of 18,696, the Nifty has seen movement in the 20% range, which makes it rather wild a year.
What’s up for 2023?
Now that the dreadful year has passed by, presenting some answers for 2023:
Where are the markets going in 2023? We expect to see the performance in 2023 to be similar to that in 2022 - on an upward trajectory, but marred by volatility.
While fundamentals from a medium-to-long-term perspective remain encouraging due to strong consumption trends and stable government policies, one can't ignore near-term headwinds, real and potential, in the form of higher inflation, increasing rates, frothy valuations, and adverse fund flows.
We expect continued performance disparity within equities for 2023, and would rather take a selective approach. We reckon scouting for and investing in stock-specific opportunities has the potential to deliver superior performance in the next year.
What is our recommendation on asset allocation in 2023? While we are at the beginning of the year, we are in the middle of cycles. A dynamic approach would work best for 2023 if one wants to play it out tactfully.
For equities, while the medium-to-long term is extremely encouraging, there are near-term headwinds, which along with volatility will provide opportunities to buy in.
The debt markets are definitely looking attractive for 2023, but as always, timing is critical. Very good return potential will be realised at the maturity of the hiking cycle.
For the long-term investor, however, sticking to asset allocation patiently works best!
If an investor had Rs. 10 lakh, what would we recommend in terms of allocation for 2023? We recommend splitting the amount equally between equity and debt, with minimal-to-no exposure to other asset classes.
While we see a case for upside on both domestic equities and debt, we reckon any allocation to other asset classes would result in a situation that screams ‘too much risk for too little to gain’.
Despite lower aggression, rates are still going up, and have the potential of harming the real estate sector. And, a full-blown negative economic impact of rate hikes is yet to play out globally; the potential of which makes any exposure to commodities and international markets avoidable.
Crypto? No, thanks.