Factors That Will Impact Share Market Outlook in 2023: Uncontrollable inflation, rising interest rates, international war and fears of a recession in the shadow of the Covid-19 pandemic, and the market hesitated in this environment. The passing year of 2022 is giving me such memories. But amidst the sound of the new year, the real question is, what will be the coming time for the stock market? The answer to this question is hidden in these 6 things, which can affect the country’s stock market in 2023.
Inflation and Monetary Policy
The whole year of 2022 was filled with the worry of inflation getting out of control not only for India but for the whole world. To control inflation, steps were taken like increasing the interest rates repeatedly. Due to this, the prices came under control to some extent, but the effect of decreasing money supply and costlier loans also affected the economic recovery.
It also raised concerns like employment and growth rate. In the coming year, the eyes of the markets of the whole world will be on all these things. Recent figures show that the situation in America is not as bad as was feared till some time ago, but the condition of many major countries of Europe is not good. In such a situation, during 2023, not only in India, but all these things are likely to affect the movement of markets around the world.
Domestic economic growth rate
The challenging conditions of the global economy are telling that the growth story of the Indian economy and markets will take shape mainly on the basis of the internal demand of the country. The good thing for India is that our economy seems to be in a better condition than other big countries of the world.
Most experts estimate that the process of recovery in the Indian economy will continue in 2023 as well. All the steps taken by the government to promote capital expenditure, its benefits will be seen in the form of better balance sheet of the companies. This is also expected to strengthen the Indian stock markets.
The next budget of the country to be presented on February 1, 2023 can also have a great impact on the Indian stock market. This budget for the next financial year i.e. 2023-24 will be the last full budget before the next general elections to be held in 2024.
In such a situation, there is a great possibility that the government will lay great emphasis on economic activities and policies that promote employment through them. Overall, there are many possibilities of announcing policies affecting the market in the short and medium term in the new budget. If the government makes some important announcements like giving exemption in income tax slab or increasing the limit of investment relief under 80C to appease the middle class, then that too will boost demand.
Obviously, the stock market can also get its benefit. Historically too, benchmark indices have generally performed well in the year preceding the Lok Sabha elections. However, such populist measures taken for electoral gains, which do not benefit the economy, can also become a challenge to the economic health of the government. Overall, whatever may be the direction of the decisions and policies announced in the new budget, they are bound to have a positive or negative impact on the country’s stock markets.
Foreign portfolio investment
The direction in which the funds of Foreign Portfolio Investors (FPI) will flow between the rich and developing countries of the world in 2023 will also have a direct impact on the stock markets. During the last two years, the Indian stock markets have been largely handled by the country’s retail investors ie small investors.
But in the new year, if FPIs become net sellers again, that is, they insist on selling more than buying and keep taking out capital from the Indian market and investing it in other countries, then it will not have a good effect on the market.
However, the other aspect of this is that if many rich countries of the world become victims of economic recession in 2023, then India can prove to be a better destination for FPIs. By the way, despite all the difficulties, during 2022, the Indian stock market has given something or the other to investors. Even after all the ups and downs, in 2022, the Sensex has increased by 4.5 per cent and the Nifty by 4.33 per cent.
Effect of covid 19
We all saw how in the last days of 2022, how the epidemic of Kovid-19 once again came into the limelight. This epidemic trend can also affect the stock markets in the new year. Especially in China, due to the sudden spread of the new variant of Covid 19 virus, and the manner in which economic activities were curbed, has raised economic concerns.
Now everyone’s eyes will be on how quickly China’s economy gets back on track after re-opening. China’s place in the global supply chain and trade is very important, which affects the whole world including India. It is obvious that this factor will also affect all the stock markets in the new year.
The Russia-Ukraine war is also another such international event, which is affecting the economy of the whole world for the last year. Whatever form the conflict between the two countries takes in the new year, it is sure to have an impact on everything from agriculture to industries and from economic growth rates to stock markets.
Although India has coped with the situation arising out of this war better than many developed countries, yet in the new year, market watchers will definitely keep an eye on this important geo-political issue.