Here’s what top market participants expect in 2022 

The year 2021 saw the Indian markets outperform most of the leading equity markets globally with many stocks in the domestic markets seeing their valuation more than double during the year. 

Headwinds, however, continue as commodity prices, inflation and the rising number of Omicron cases feature among the top concerns of most market participants. So, what should investors expect from the Indian stock markets in 2022? Here’s what some of the top market players are expecting. 

ICICI Securities 

The domestic broking major has a Nifty target of 20,000 and 66,000 for the Sensex. “With the worst of asset quality concerns behind us amid resolution of big ticket stressed assets and economic optimism in the post-Covid era, Nifty earnings CAGR is impressively placed at 25.7 per cent in FY21E-23E,” it says. 

Further, ICICI Securities believes that mid-caps and small-caps that gave stellar returns in CY21 will continue to shine in CY22. “Going forward, innovative themes present in the midcap & small cap space (like speciality steel chemicals, home textiles, CRAMS, etc), superior earning potential and reasonable valuations (trades at

ICICI Securities’ top picks for the year are: Bharti Airtel, Phoenix Mills, Minda Corp, Radico Khaitan, eClerx Services, Tech Mahindra, Orient Cement, Dwarikesh Sugar, NRB Bearings, Aster DM Healthcare. 

Motilal Oswal Asset Management Company 

Santosh Kumar Singh, Head of Research, Motilal Oswal Asset Management Company believes that sectors like real estate, financials and pharma will outperform in 2022 though it believes that markets may remain range bound as inflation is rising and interest rates may start moving up. “This would mean that very high valuation companies may start seeing relative correction as the discount rate would start moving up” he says. 

Next year may not be a year of a broad-based rally but would be a year for stock pickers and one needs to be very selective as the value destruction in certain segments can be significant, he cautions while adding that 2022 is starting with an expectation of tightening liquidity, increasing interest rates and uncertainty around COVID-19 still remaining. 

Axis Securities 

Naveen Kulkarni, Chief Investment Officer, Axis Securities is of the view that 2022 will be volatile but still good for equity investment. 

“2021 has been a year of recovery, rehabilitation, and establishing a base for future growth. 2022 will be a little more volatile but will still be very good for equity investors in India. 2022 is very likely to be another year of good double-digit returns and continued wealth creation. Autos, banks, and capital goods, literally the A B C of equity markets, will be the most interesting sectors for 2022,” he says. 

Sharekhan 

The broking firm believes that unlike the case in 2021, the current year would see equity returns revert to the long-term average of mid-to-high double-digit range – still quite robust when compared to other asset classes, especially bank deposits.

“As an investor, one needs to stay invested in the right quality of stocks, keeping the bigger picture in mind of a multi-year growth upcycle ahead. In fact, the past experience shows that the correction of 10-12 per cent in the benchmark indices is usually a good opportunity to buy, with scope for handsome returns over the next 12-24 months,” it says. 

However, it would be prudent to reduce exposure to the small-cap space, especially penny, speculative, and momentum stocks, it cautioned while highlighting the fact that in the past two decades, the one-way small-cap rally lasted for not more than 20-22 months and was always followed by a sharp correction. 

The broking firm prefers sectors like real estate and building material stocks (cement, pipes, tiles, plyboard etc.), corporate sector banks, IT services, and select stocks in the consumer and engineering space. 

Further it’s preferred stock picks with 18 to 24 months of investment horizon include DLF, ICICI Bank, Infosys, Maruti Suzuki, SBI, UltraTech, Reliance Industries, Balkrishna Tyres, Polycab, Gland Pharma, Healthcare Global Enterprises, ISGEC Heavy Engineering, Tata Power, Greenpanel Industries and Radico Khaitan. 

Quantum Mutual Fund 

According to Sorbh Gupta, Fund Manager- Equity, Quantum Mutual Fund, some of the hot and popular themes like electric cars and fintech are actually best avoided for the time being as the valuations have run up too much on the back of a strong outlook. 

“Going into 2022, investors should also be cautious about popular & hot themes like electric vehicles, Consumer tech & fintech. While all these are expected to play out well over the long term, some of the underlying stocks are factoring in too much good news & are at bubble territory valuations with no positive cashflows insight for the next few years,” he says while adding that it would be wise to look for stocks and portfolios with a contrarian approach. 

He further says that investors should not be unnerved by any near-term volatility and continue moving towards equity allocation as per the long-term financial goals through systematic investment plans.  

Any sharp correction due to near-term headwinds can offer additional valuation comfort and should be used to allocate more to equities with a long-term perspective, he says.