Indian equities may sail into choppy waters on global headwinds in 2023 Indian equity market is likely to be “choppy” in 2023 and the returns might be moderate or even negative as a raft of factors, including geopolitical uncertainties, recession fears and interest rate trajectory, will weigh on investor sentiments. Market experts opined that the Indian market will be influenced by a combination of domestic and global factors, including the coronavirus situation and policy initiatives in the Union Budget next year. Despite strong global headwinds roiling financial markets worldwide this year, the domestic equity market stood strong as a stellar performance of bluechips saw the 30-share Sensex soaring nearly 13,000 points to its all-time high of 63,583.07 on December 1, in less than six months after touching its 52-week low of 50,921.22 points on June 17. “Also, next year is the last year before elections due in 2024 which could result in many policy-led initiative announcements in the upcoming Union Budget in February,” he added. Mayank Mehraa, smallcase manager and Principal Partner at financial consultancy Craving Alpha, said the government’s economic policies and reforms, performance of major economies and foreign capital inflows will also influence the domestic equities. Sensex has climbed 2,656.46 points or 4.56 per cent till December 28 this year.Suman Bannerjee, CIO of US-based hedge fund Hedonova, said, “we’ll see negative returns in 2023”, adding that the Indian market is very overvalued compared to global counterparts. “Once the US Fed pivots and starts reducing rates, we’ll see bear markets in the USA spillover to India,” he noted.Trends in the equity market next year will also continue to be guided by movement of rupee and the US dollar as well as international oil benchmark Brent crude.Markets are likely to remain choppy in 2023 too, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, adding that global growth is slowing down and interest rates are rising. “This is not a favourable environment for equity, at least in H1 of 2023. Expect only moderate returns from equity in 2023,” he said.Market analysts said 2022 was a volatile and turbulent year for global equities, marred by varied global headwinds, including Russia-Ukraine war, high inflation, fears of global economic slowdown and re-emergence of coronavirus. “In this backdrop, Indian equities have delivered a stellar and sharp outperformance for the year with the Nifty-50 and Sensex clocking all-time highs during early part of December,” Sanjeev Hota, Head of Research at Sharekhan by BNP Paribas, said.”The multiple macro-economic headwinds of the 2022 global economic slowdown, rising inflation, liquidity tightening, geopolitical tensions and re-emergence of COVID-19 scare will continue to weigh on global equity markets,” Hota said in a report on market outlook 2023. According to him, there will also be ample attractive opportunities for long-term investments.This year, aggressive rate hikes by central banks globally to tackle inflation, rising commodity prices and the Russia-Ukraine conflict led to an exodus of foreign money.Till December 28, Foreign Portfolio Investors (FPIs) made a net withdrawal of Rs 1.21 lakh crore (nearly USD 16.5 billion) from the Indian equity market and pulled out a net amount of around Rs 16,600 crore (USD 2 billion) from the debt market, as per data available with the depositories. Retail/DIIs (Domestic Institutional Investors) absorbed all the selling by FPIs and supported the market, Vijayakumar said.”India so far stood out like an oasis in the desert, where the rest of the world is facing multiple challenges. The resilience has been led by strong corporate earnings growth which is expected to continue its momentum going ahead as well,” Khemka said.He noted that the driving force behind India’s outperformance has been the pick up in capex by the central government which revived the Indian economy from Covid-led slump and strong consumption demand which reflected in the buoyant domestic macro data points. In a note, Religare Broking said 2022 was the year of returning to normalcy, be it economy at large or life in general. “What was not normal was supply bottlenecks caused due to geopolitical issues. Though rising interest rates was not the only solution to ease this supply side inflation, it had to be done. India managed its economy well and it is the only economy which has returned to pre-pandemic growth rate. Accordingly stock markets outperformed,” it said.
The Japanese pharma major is also filing a plea before the Delhi HC seeking appointment of forensic auditors to analyse transactions involving IHH, Fortis Healthcare and RHT, Singapore, as directed by the HC on October 18.
The development is likely to create legal hurdles and delay the proposed open offer as IHH had recently told FE that it could only go ahead if Sebi agreed with its legal interpretation that the SC’s September 22 order has lifted all such restraints.
IHH managing director and CEO Kelvin Loh told FE on November 9 that the company would like to go ahead with the open offer “as soon as possible” as there has already been a delay of four years. Ravi Rajagopal, chairman of Fortis Healthcare, had added that their legal counsel has advised that the company can go ahead with the open offer as the SC order has disposed of various appeals, including the suo motu contempt. “We have represented to the Sebi and the matter is with them,” Rajagopal had said.
However, legal observers told FE that the matter is not that straightforward and simple as the Delhi HC has to take the final call on the matter of open offer as well as whether a forensic audit has to be done in the share sale which was executed in 2018.
Also Read: IHH to float open offer for Fortis if Sebi concurs with our legal view: MD & CEO
Loh and Rajagopal had said the possibility that the matter may take a different turn when it comes up in Delhi HC cannot be ruled out.
IHH had in July 2018 acquired a 31% stake in Fortis Healthcare for Rs 4,000 crore through the bidding route. It had also earmarked Rs 3,000 crore to make an open offer for an additional 26% to the public shareholders as required under the law.
Daiichi has written to Sebi that the SC in its September 22 order had asked the HC to consider ordering a forensic audit into the dilution of FHL shareholding, repeated violation of undertakings and assurance by former FHL promoters — Malvinder and Shivinder Singh — and the transaction between FHL, IHH and the clandestine transfer of Rs 4,666 crore to RHT Singapore.
Daiichi is “severely prejudiced” with IHH’s clandestine attempt to subvert the status quo order directed by the SC on December 14, 2018, and September 22 with respect to the conduct of forensic audit and the pending proceedings before the HC by purportedly consulting regulatory authorities, including Sebi, on the proposed FHL-IHH transaction. It has reiterated that the FHL-IHH transaction was currently sub-judice before the HC where FHL is also a party, its solicitors, P&A Law Offices, have said in the letter.
“We further state that any such attempt by FHL and/or IHH to proceed with the FHH-IHH transaction would be in direct contravention of the HC and SC orders,” the letter sent by the law firm has stated. Daiichi Sankyo is pursuing the enforcement of Rs 3,500-crore arbitration award against the Singh brothers pronounced by a Singapore tribunal for concealing information when they sold Ranbaxy Laboratories to it for $4.6 billion in 2008. The apex court had in 2018 put on hold the sale of Fortis Healthcare to IHH on a contempt plea filed by the Japanese drugmaker against the Singh brothers.