The markets have witnessed a strong bull run over the past one year, with both NIFTY and Sensex touching new peaks, surpassing 18K and 60K levels respectively. The benchmark NIFTY has generated returns in excess of 40 percent. Other sectors have not been far behind, registering robust all-round growth.
The past year saw a massive rush of retail investors wanting to join the rally and multiply their money. In this period, the record number of demat accounts opened is proof of that. This brought immense liquidity in the market and since then there has been no looking back.
As we enter Samvat 2078, the mood is still quite optimistic. We ask market experts what sectors will continue to move up over the next one year.
Neeraj Chadawar, head - quantitative equity research, Axis Securities, says, “SAMVAT 2078 will be a year of balance-sheet leverage, led by significant improvement in corporate profitability.” He is optimistic about the future of Indian equities and suggests, “the Indian market has entered into an earning’s up-cycle with an expectation of more than 20 percent growth in Nifty’s earnings in the next two years.”
For solid returns in SAMVAT 2078, Chadawar is bullish on housing and banking based on their improved outlook and current lower-interest-rate regime. He believes, the small and mid-caps are picking up steam, and balance sheet leveraging is likely to play out in 2022 with an improved outlook on return ratios and profitability. Travel and tourism stands to be a more promising theme, which has gained further momentum from the pick up in vaccination drive. He finds the infrastructure sector an emerging theme as the government increases its spending in this space, while digital and cloud will remain major, long-term structural themes.
Urban and rural demand
Vinod Nair, head of research at Geojit Financial Services, is optimistic that the FMCG sector will perform well in the coming year. He believes, “Revival in urban demand given the opening of markets, healthy rural demand aided by good monsoon and sowing, higher MSPs and Government of India’s initiatives to revive the economy will support the growth of FMCG sector.” The prevailing margin pressure is likely to reduce when input prices start to normalise, he adds.
With economic activity picking pace, there is a sharp jump in business/ leisure travel, supported by strong traction in vaccine coverage and lower number of infected. Easing of restrictions on seating capacity have added to sharp revival in passenger traffic. This makes the travel and tourism sector the next favorite for Nair. He says, "Going ahead, the gradual lifting of restrictions in international traffic will lead to higher occupancy in hotels and improved demand in leisure activities.”
Nair’s next pick is the pharma sector.
He says, “The long-term outlook of the sector looks intact backed by its strong product portfolio and focus on R&D. We expect once the consolidation is over and the valuations are back on track, the sector will continue witnessing strong growth momentum.”
An uptick in manufacturing, reforms in power and reopening of the economy will provide impetus to power and manufacturing sectors. Nair says, “The demand for power is rising and we expect the major beneficiaries of this trend to be companies that are focusing on renewable energy as their future growth.”
PSUs get an airlift
Deepak Jasani, head of retail research, HDFC Securities, opines, “Sectorally, PSU still has steam left post Air India decision and some progress on BPCL and SCI divestment. Banks (both PSU and private) could come back in the reckoning. Auto and capital goods can also do well after subdued performance over the past few quarters.”
Vaibhav Agrawal, CIO, Teji Mandi picks private banks to give stellar performance in the coming year as he feels, “Credit growth is at a decadal low of 5-6 percent. As the economy revives, credit growth should pick up, which in turn would lead to improvement in loan growth and fee income for these banks.”
With low interest rates, capex cycle expected to revive and government's thrust on infra development, companies in the industrial sector could see a tailwind, says Agrawal.
He feels the travel and tourism sector has a huge potential in the coming quarters as the economy is coming out of a one and half year pandemic. Discretionary spends and revenge consumption are likely to pick up, and stocks in this sector would benefit from the same.
Manoj Dalmia, founder and director, Proficient Equities Limited, is of the opinion that housing and banking will be one of the themes to watch out for on account of improved earnings and lower interest rates regime. He feels infrastructure and real estate will play out well moving forward due to the government’s increased spending while travel and tourism will gain a good momentum in the coming year.
He says, “Any company doing well in the internet of things/artificial intelligence/machine learning will do well in the coming days.”
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