Bhubaneswar: After a poor show in the first ten months of 2022, the equity markets finally look like
they may have year-end cheer for investors says DSP Mutual Fund in its monthly report Netra which
tracks the latest economic trends and insights. The November issue of DSP Mutual Fund’s Netra
mentions that factors like central banks expected to moderate interest rate hikes in the future,
easing of supply-chain costs, squeezing of systemic liquidity and fall in natural gas prices along with a
possible return of FII buying may ease volatile equity markets in the near future. Already, global
container shipping rates, one of the biggest sources of supply side inflation, are down 67% from their
peak of last year and are approaching pre-covid levels. The freight rates for container ships is now
down 68% to $1,486 per container. With inflation under control the pressure on the RBI to hike
interest rates would reduce. If this interest rate hike cycle is shorter, then Nifty valuations could
remain higher than in the past, adds DSP Mutual Fund.
Less volatile markets will create more opportunities for active stock picking. Even in the first ten
months of this calendar year; while the Nifty index itself rose less than 5%, the Nifty Bank index rose
almost 17.5% over the same period. “The equity market seems poised to move up in line with its
long term secular trend, as FIIs seem less bearish on Indian equities, valuations as evidenced by the
price earnings ratio have become more attractive and Indian investors continue regular investments
in equity mutual funds via SIPs,” said Sahil Kapoor, market strategist and head of products at DSP
Mutual Fund.
DSP Mutual Fund believes that the banking sector still offers attractive potential for appreciation.
Banks now have much less dud loans on their balance sheet and demand for loans is showing a
sharp increase in line with the revival in the economy. This means their income levels will rise
without a commensurate increase in defaults. For some large banks net non-performing loans have
fallen to decade lows and bank balance sheets remain robust.
Another sector showing promise in line with PM Modi’s focus on ‘Make in India’ is the defence
sector. Domestic firms are manufacturing more equipment in India both to meet our own needs and
for exports. As a result, defence exports have risen more than 6 times in the last 7 years. With a
mindful blend of respectable valuations and thoughtful earnings, investors can reap benefits from
this sector, adds DSP Mutual Fund. As demand for goods rises, factories are running near to
capacity. To meet growing demand, industries will now have to buy more machines. Capital goods
companies that manufacture such machinery are seeing a big increase in orders. This will mean an
increase in their sales and profits offering investors yet another chance at good returns cites Netra.
