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India's Stock Returns Will Be Capped In 2023, Says Credit Suisse's Neelkanth Mishra

Indices may not fall 'a lot' in 2023 as there will be enough people willing to 'buying the dips'.

Fiscal Headwinds To Growth Moderate: Neelkanth Mishra
Fiscal Headwinds To Growth Moderate: Neelkanth Mishra

India's benchmark stock indices may continue to grow at a low double-digit rate in 2023, according to Credit Suisse's Neelkanth Mishra.

The indices may not fall "a lot" in 2023 as there will be enough people willing to "buying the dip" to pull the benchmarks up, he said.

"The challenge I see is with the PE premium of the Indian market to the world, which has expanded dramatically," Mishra, Co-Head of Asia-Pacific Strategy at Credit Suisse, told BQ Prime's Niraj Shah.

Mishra emphasises the possibility of growth shocks manifesting into policy decisions in the midst of geopolitical tensions roiling global markets.

"From where we are now," he said, "the global PE may remain muted, while India's PE premium remains maxed out." Therefore, the growth in earnings has pretty much put a ceiling on what the market can return, he said.

The growth drivers in India, he said, are mostly domestic. The higher tax-to-GDP ratio, lower-than-expected inflation, and easing supply pressures are among the factors that are driving the domestic economy.

As real estate prices pick up, it will incentivise developers to accelerate construction, Mishra said. Adding to this, spending by state governments is also increasing.

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Mishra prefers large-cap stocks amid continuous market volatility.

Since mid caps have more exposure to India than the rest of the world, their earnings may continue to be better off, he said. "But my apprehension is that at a time of uncertainty, as risk appetite weakens, it tends to affect the mid-cap PEs a lot more."

Watch the full interview here: