Inflation is expected to be a pivotal issue in the first half of 2023. Inflation combined with Interest rates has been a major concern for investors and central banks all around the world.
High Inflation led by increasing commodity prices and cheap credit has made a dent in the Global stock markets but the Indian stock market has been completely isolated from their effects and has outperformed them by a good length.
Inflation in India has been almost contained and the market expects the Reserve Bank of India to go easy on the interest rates in 2023. The inflation is expected to subdue further, which will be in line with market expectations. Thus, Global Inflation and Central bank policies will be in limelight more than the domestic rates.
The Inflation and Interest rates might have an impact on the financial results of companies during the first quarter.
Russia- Ukraine war has been the major cause of Inflation and the energy crisis in the U.S.A and Europe. The energy price across Europe skyrocketed in 2022 and wreaked havoc on the pockets of consumers and investors across the world.
The Russia- Ukraine war is expected to come to an end in 2023, which will have a tremendous impact on the global stock markets and it will put end to the global geopolitical tension between NATO and Russia. This will help bring down the energy prices, and as the relations improve, the supply of Natural gas in Europe will come to normal.
Resolution of the Russia-Ukraine war in 2023 will help:
- Solve the energy crisis in Europe.
- Bring down Inflation in Europe and U.S.A.
- Commodity prices will be normal.
- Indirectly help lower the interest rates.
Covid has been a bad omen for markets since its first wave. And Covid has been back in China at the end of 2022.
For 2023, China’s covid situation will be in focus for investors all over the world. The Zero-Covid policy of the Chinese Government was upsetting the markets globally as the factories in china were shut abruptly even with a minute number of contaminations.
As per the current situation, the current wave is expected to peak and end by the first half of 2023. Which will enable herd immunity in china and improve & stabilize the country’s future economic outlook.
China’s Covid problem can spread globally, therefore it will be a big uncertainty as to how the other major countries will respond to the predicament without hurting the economy.
A big market crash similar to April, 2022 is not expected but we might witness some correction or Volatiltity in response to the outbreak.
A big covid wave across the world could dampen the gains of the indian market and also exacerbate the bleak global market performance even further.
Therefore, the counter covid policies of countries will be an important thing to look out for.
The Union Budget 2023 will be the last full budget of the existing NDA government before the 2023 central elections. The budget is expected to tame the investors with some significant announcements of pro-business policies for investors.
Although the market could react unpredictably to the budget. As it also depends on how much has been already discounted by the market expectations, a mediocre budget could also trigger a surprise rise or fall in the market.
Also, the policies and announcements can be sector-specific, therefore some sectors will be of more emphasis which might outperform the other sectors in the market.
These are the 4 factors which will be of the essence in 2023, the list is not exhaustive, as the only certain thing in the market is uncertainty, we must expect new factors to rise up and lead the course of future. Inflation, the Russia-Ukraine war, Covid and Union budget will be of great prominence for the stock market as well as the economy and they will dominate the headlines all across 2023 as some of them have in 2022.