CY21 has seen a strong economic recovery from the unlocked lows. The recovery in growth mainly stemmed from the government led initiatives by focusing on "Atmanirbhar" schemes panning across a gamut of sectors, which, in turn, will act as a multiplier catalyst across layers of GDP growth and get the economy back on fast track to achieve the $5 trillion aspiration.
At the onset of CY22, a sea change is expected in the way business operates and transforms itself given the innovations in the Digital and Tech world. Hence, in this report, we try to highlight various themes that will run across different sectors and their long term ramifications, which will be consequential on all stakeholders concerning the business. From a market perspective, sectors that we are bullish on are IT, capital goods, auto ancillaries (EV exposure), retail and real estate.
We also highlight the key risks for CY22 that may get manifested in the form of a) reversal in interest rate cycle globally amid inflationary pressures and b) geopolitical risks that may decide the direction of already spiking energy costs.
Some of the themes to hog the limelight for CY22 are:
Nifty fair value pegged at 20,000
- Would Technology continue to shine on virtualisation of business
- Will private sector capex revive capital goods
- Would retail sector emerge as a dominant performer
- Would EV dent autos after higher commodity and chip concerns
- Would pharma & chemicals remain volatile
- Would there be a revival in credit growth after asset quality concerns are behind us
- Have metals peaked out
- Would FMCG companies deliver growth commensurate with valuation
- Would consumer durables keep gaining market share
- Is real estate a one-year story
- Would 5G further lift fortunes of telecom companies after tariff hikes
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% in FY21E-23E. We value the Nifty at 20,000 i.e. 24.5x P/E on FY23E EPS of Rs. 815 with corresponding Sensex target at 66600.
Midcaps, small caps gave stellar returns in CY21. This is expected to continue in CY22E driven by inherent business moats as the earnings CAGR for midcap, small cap in FY21-23E is expected at ~39%, 28%, respectively. 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 <20x PE on FY23E, ~0.5x PEG) make us believe that more upsides are in store for investors.Stock Picks for 2022
- Bharti Airtel
- The Phoenix Mills
- Minda Corp
- Radico Khaitan
- eClerx Services
- Tech Mahindra
- Orient Cement
- Dwarikesh Sugar
- NRB Bearings
- Aster DM Healthcare
For details, click on the link below: Link to the report
Source : Equity Bulls