Four investment strategies that may work in 2023 amid uncertainties

His 2023 investment tips – (i) secure yield through relative yield opportunities in bonds and large caps (ii) add long-term value to structural themes of finance, domestic economic cycles and investment-driven themes. Allocate (iii) surprise-fighting portfolios through enhanced defensive assets, and (iv) expand beyond traditional through alternative strategies

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Q. What is the outlook for the market, given the forecast for a moderate recession?the level you are looking for wittySensex?

Against Indian equities as rising absolute and relative valuation premiums over key peers are offset by expectations of strong domestic growth and resilient earnings growth given the challenging macro environment I take a neutral stance. Within equities, we are overweight large-caps because they have relatively better macro fundamentals than mid-cap and small-cap stocks and a greater margin of safety in terms of earnings and valuations. We are overweight the domestic sector as earnings are becoming more resilient against the backdrop of global macro weakness.

Q. Is the IT sector an opportunity now or more pain to come?.

We are neutral on the IT sector as valuations have become fairer after the correction. However, earnings downgrade risks remain high given the challenging global environment.

Q. I would recommend having a diversified stock portfolio. What defensive sectors to watch in 2023?

Given the challenging global macro environment, we believe investors should prepare for unexpected downside. Moreover, the Indian market significantly outperforms its peers, indicating a very low margin of safety. Therefore, in our view, maintaining a defensive portfolio allocation through cash, gold, and adding a defensive slant to equity sector positioning is a smart approach to weather unexpected spikes in volatility.

Q. Bank Nifty has achieved a return of over 21% in 2022. What level do you think Bank Nifty could reach by the end of the current fiscal year?

Financials is an important overweight sector. Broad credit growth is accelerating as economic growth picks up. In addition, healthy corporate balance sheets, improved net interest margins, and increased loan originations are likely to support sector profitability in 2023. Rising interest rates are an additional tailwind supporting yields and spreads in the sector. The sector trades below the market with excellent growth rates compared to other major sectors.

Q. What themes are expected to feature on Dalal Street ahead of the 2023 budget?.

We believe it is prudent to follow the 2023 SAFE investment strategy. (i) Securing yield through relative yield opportunities between bonds and large cap stocks; Investment-driven themes (iii) strengthen portfolios for the unexpected through defensive assets and (iv) expand beyond traditional boundaries through alternative strategies.

Disclaimer: The views and recommendations above are those of the individual analyst or brokerage firm and not those of Mint.