Investors will remember 2022 as a year of unprecedented turmoil. The benchmark S&P BSE Sensitive Index, which reflects the tumultuous year, fluctuated by almost 13,000 points from a low of 50,921.22 on June 17 to a record high of 63,583.07 on December 1. In addition, the Nasdaq in the US is down by almost 30%, and China's Shanghai Composite is down by 15%, while the Sensitive Index has returned 5.29 percent year to date until December 16, 2022.

Where will the markets be in 2023, then? "In the Nifty 50 universe, strong profit trajectory is still present. B. Gopkumar, MD & CEO of Axis Securities, predicts that Nifty EPS [earnings per share] will increase by 11%, 14%, and 13% in FY23, FY24, and FY25 [respectively]. The Nifty, the National Stock Exchange's benchmark index, is currently trading at an EPS of '832 and a price to earnings ratio (P/E) of 22.4. He sets the Nifty's 2023 goal price at 20,400 after it ended at 18,269 on December 16, 2022.

Experts predict that the relative outperformance of the Indian market, which has been supported by favourable macroeconomic variables and improving fundamentals for Indian corporates, would continue in 2023. A strong job market, a favourable monsoon, and a drop in commodity prices would all be advantageous.

But what are the themes and methods that could be effective in 2023? According to Pankaj Tibrewal, Senior VP and Fund Manager (Equity) at Kotak Mahindra Asset Management Company, "the strategy for 2023 would likely be a story of two halves, with the first half being more value-driven as cost of capital will continue to be on the higher side and the second half being led by earnings growth proxies as central bankers would look to pivot from the monetary tightening cycle."

Value-based strategies outperformed momentum-based ones by a wide margin in FY22 as a result of the increase in interest rates and a concentration on profitability. "A pick-up in credit growth and a recovery in domestic cyclical equities will likely be the driving forces behind the outperformance of value stocks in the first half of CY2023. By the middle of 2023, the theme of growth might return. The interest rate cycle may have reached its top by then, according to Gopkumar of Axis.

India is notable for being one of the few significant stock markets that had gains in 2022. However, indicators point to an inflated market. According to Motilal Oswal, the MSCI India index is currently trading at a record high P/E premium of 155% over the MSCI EM index. This contrasts with the premium's 64% historical average. According to Nitin Bhasin, Co-head of Ambit Institutional Equities and Head of Research at Ambit Capital, "the trend will continue and probably value will continue to perform in India with relatively affordable sectors expected to perform better in CY23."

principal market themes:

While there were several themes in 2022, the local equities market performed well due to supportive government initiatives. The Union Cabinet, for instance, provided financial incentives of 50% for the production of semiconductor fabs across technology nodes, as well as for compound semiconductors, packaging, and other chip facilities. Will the industrial sector succeed as a result of the government's focus on performance-linked incentive (PLI) programmes?

"We anticipate that the manufacturing industry will continue to grow in 2023. In the coming years, India may become a major hub for manufacturing due to a number of factors that suggest this industry is about to experience a rebirth.The Make in India drive, PLI-led incentives, a competitive tax system, and the robustness of the Indian business balance sheets are some of these triggers, according to Gopkumar.