Indian equities will see slower but positive returns in 2023, if the domestic economic environment improves and the Federal Reserve's quantitative tightening cycle ends, according to Vinod Karki of ICICI Securities.
"We're entering 2023, where volatility will be comparatively less than in 2022," Karki, head of equity strategies, told BQ Prime's Niraj Shah. "We started with Omicron, then the Russia-Ukraine conflict, and then soaring inflation. That was followed by jumbo rate hikes by the Fed. So, I don't think we will see this kind of activity this year."
"There will be uncertainty, but those kinds of mega-events, I don't foresee them," he said. "Volatility will be lower, which is reflected in the slump in the VIX indices in India and the U.S."
"That will keep valuations elevated."
The markets might be reaching a "high optimism zone" with VIX slumping, so people are getting complacent, according to Karki. "So we're entering a bubble or an optimistic zone, but we're not at the top of it."
"Seeing the performance this year, it may very well be the case that next year we will not outperform emerging markets," he said. "Especially those that have not performed to the extent India has performed."
Watch the conversation here:
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