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Samvat 2079 now looks much brighter and more promising. The Indian economy stands in a sweet spot of growth and remains the land of stability against the backdrop of a volatile global economy. We believe the relative outperformance of the Indian market will likely sustain in Smavat 2079 as well and would be led by favourable macroeconomic factors and better-than-historical fundamentals of Indian corporates. While inflation continues to be a major challenge in the developed world, inflation in the domestic economy seems to be manageable. Good monsoon, higher reservoir levels, cool-off in commodity prices, and healthy job/labour market cumulatively indicate that the domestic economy would accommodate the prevailing inflation rather smoothly. The majority of the highfrequency indicators are trending upwards and the uptick from the pre-Covid levels is visible, indicating the resilience of the Indian economy.

While the country’s macro set-up is positive, the fundamentals for Indian corporates have also improved. Profitability across the board has improved significantly. The cumulative and rolling net profit of the NSE 500 universe for the last 4 quarters (till Q1FY23) touched an all-time high of Rs 10 Lc Cr and loss-making sectors, too, have turned positive and contributed notably to the net profitability. Moreover, after a muted performance for several years, ROE for the broader market is improving as well. Asset quality of private as well as PSU banks has improved significantly as compared to the levels seen a couple of years back. Thus, in light of these positive attributes, we firmly believe that the outperformance of Indian equities seems highly sustainable in Samvat 2079.

Factoring in all these economic and market developments, we present the following themes for SAMVAT 2079:

* Housing and Banking will be major themes to watch out for in 2023 on account of their improved economic outlook and the pick-up in credit growth. Moreover, affordable housing may even get a further push in the upcoming budget.

* Consumer space is witnessing a strong revival and many categories are normalizing to pre-Covid levels with a structural uptick in multiple sub-segments. QSR space is well-placed to deliver superior returns.

* Demand momentum in the CV segment is likely to sustain and we expect the CV cycle to maintain its momentum, driven by the pick-up in economic activities and the government’s focus on infrastructure

* With a pick-up in the real estate and housing demand, the home improvement theme has bolstered and continues to be robust in 2023.

* Travel & Tourism stands to be a more promising theme, which has further gained momentum post a pick-up in the vaccination drive.

Based on these themes, our Diwali picks are:

ITC, Ashok Leyland, Polycab, Sundaram Finance, Indian Hotels, IDFC First bank, Westlife development, NOCIL and Aptus Value Housing

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