Union Budget for fiscal year 2023, which will be presented by Finance Minister Nirmala Sitharaman on February 1, is likely to focus on critical issues like demand generation, job creation, and putting the economy back on sustained GDP growth of over 9 percent going forward, says Amit Jain, Chief Strategist - Global Asset Classes at Ashika Group.
In an interview with Moneycontrol, he said that the government may also dole out tax relief for the MSME sector by having differentiated GST slabs.
Jain, who has worked in banking and financial services for 18 years, believes that the IT sector will continue to outperform the broader market as the world is moving towards digitalization. Here are the edited excerpts from the interview:
The Nifty50 jumped 24 percent in 2021. Is there any possibility of double digit returns in 2022 in comparison with 2021?
In our view CY 2022, will be the year of consolidation for all gains made in the last two years bull run post March 2020. If you see from March 2020 lows November 2021 highs Nifty is up over 230 percent, which is an outstanding performance by any standards.
Even if you compare it with the top 10 markets of the World, India has been leading the pack since March 2020 lows. Hence 10 percent correction from its peak is not a concern at all, rather I will say it is a healthy correction for long-term sustainable bull run of Indian markets. It is quite possible thet this correction may further aggravate in the 1st half of 2022; however, Indian budget & fiscal projections may be the joker in the pack going forward.
After recent correction, do you see any particular themes that one can consider for investing for 2022?
For Indian Markets in 2021, IT had been the leading sectoral pack with 200 percent ROI (return on investment) at broader index levels, where Individual stocks had given ROI up to 500 percent since March 2020 lows. This sector will continue to outperform the broader market as the world is moving towards digitalization. Other outperforming sectors for 2021 had been Metals, Chemicals, Manufacturing & Retailing. These sectors may see some time correction in 2022, as there are chances that some of the undervalued sectors may lead the rally for New Year 2022.
For CY 2022, we believe the Banking, Automobile, Healthcare & Infrastructure sectors may lead the pack for a broader market. We also feel value investing opportunities in selected PSU space, which offers very high dividend yield at current valuation. There are higher chances that we may see more PSU candidates for divestment list, once we have LIC IPO in CY 2022.
2021 was the record year for primary markets in terms of number of issues, amount of fund raising, multi-baggers etc. Do you expect similar kinds of records in the primary market in 2022 as well?
Yes, 2021 had been a record year for IPO’s & FPO’s in the Indian market, however in 2022, we are expecting the biggest ever IPO of LIC, which may be gulping maximum liquidity of retail investors. If that IPO succeeds, then we may see more fund raising by Indian corporates.
What are the major events to watch out for in the coming year 2022?
Calendar Year 2021 had been an exceptional year for the Indian market where FII had sold almost Rs 87,000 crore worth of equities, but still the Markets are up almost 24 percent at index level. This had been a great learning for all fund managers, that not to ignore the power of domestic retail & HNI clients, who have actually neutralized the possible catastrophic impact of FII selling.
This emerging investment class of retail investors is dominating Indian markets with 3 crore + new demat accounts opened in the last two years. This investor class also participates through monthly SIP book size of Rs 11,000 crore or I can say Rs 1.2 lakh crore investment annually through mutual fund route. This is the biggest ever inflow for Indian securities markets. Hence, going forward, each fund manager must also track domestic retail clients flow as well, along with FIIs.
For CY 2022, we must keep an eye on Global flow in the era of tapering by the US Fed, along with fiscal deficit numbers of the Indian Economy. Indian currency has to bounce back from current lows, to build confidence of Global Investors.
With less than a month left for the Budget, do you anticipate any big bang announcements and what could be the focus areas? Also, in the view of upcoming state elections, do you think there will be any populist measures?
In my view, the Union Budget 2022-23 will focus on all critical issues like demand generation, job creation, and putting the economy back on sustained GDP growth of over 9 percent, going forward. Some of the key sectors on which the government will focus will be infrastructure, agriculture, and healthcare which will revive the inherent demand of Economy.
There are higher possibilities that we may have differentiated GST slabs for MSMEs compared to Large corporate houses. Today, the MSME sector in India is the second-largest employment creator after agriculture. It provides jobs to almost 12 crore+ citizens of India. It contributes almost 30 percent of the GDP and accounts for 49 percent of exports. Hence, the government may try to give some tax reliefs to this sector by having differentiated GST slabs. Also, for a small-scale manufacturing company, tax benefits on R&D infrastructure may be restored as the government is pushing for technological upgradation in small businesses.
If a 25-30 year old investor is looking to invest Rs 10 lakh this year, how should he/she go about it or create his/her portfolio to get healthy returns?
At this moment investors should invest in those equity mutual fund schemes which have higher weightage for banking, infrastructure, healthcare & automobile sector. These schemes may outperform other schemes in the next 3 to 5 years. Also, for conservative investors it is advisable that they should invest in Gold rather than Debt MF with current YTM close to 5 percent.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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