We believe the stock markets will be on solid footing, supported by post-pandemic economic growth. Due to India’s vaccination programs, the COVID-19 pandemic now appears to be more under control.
Strong economics such as GST collection, electronic invoicing, IIP, freight and consumption across industries over the past few months are also encouraging, which bodes well for the markets.
Omicron, inflation, the collapse of Evergrande in China are matters of concern for the economy and global markets, but we expect that the upturn in economic activity can be delayed at best – but not deviate – due to new strains of viruses. The market still has the potential to surprise positively, as the macroeconomic structure and earnings remain broadly favorable.
With the reforms initiated by the government, digital adoption and the impetus given to the creation of infrastructure should accelerate as manufacturing activity picks up.
Indian business fundamentals have improved significantly over the past two years compared to other emerging markets. If the government continues its reform momentum, India could continue to attract larger foreign direct investment (FDI) flows.
Several structural themes emerge, which we believe should offer better opportunities for alpha generation.
Main themes / sectors for 2022
1) VE sector: In line with India’s mission to achieve clean mobility, we have seen many car manufacturers invest in and start manufacturing electric vehicles. According to a report by Colliers, the electric vehicle market in India is likely to attract investment of Rs 94,000 Cr over the next 5 years. We believe there is enormous potential for growth in this space.
Our top picks in this industry include Sona BLW, Minda Industries, and Tata Motors.
2) Defense: The Indian defense market is on the cusp of a revolution, with the introduction of government policies like Aatmanirbhar Bharat, Make in India and the introduction of private actors to speed up defense production and increase exports by 5 . In November, Prime Minister Modi laid the foundation stone for the Rs 400cr defense industrial corridor project in Jhansi to strengthen defense manufacturing in India. India aims to increase production to $ 25 billion in the coming years, making defense an attractive sector to park investor funds.
Our top picks in this industry include MTAR Tech and L&T
3) IT sector (New Age Technology): We believe the IT sector is in a multi-year bull cycle due to a robust demand environment, strong transaction dynamics, a healthy transaction pipeline and accelerating digitization across all sectors. While valuations are not very cheap, we believe IT companies would post strong earnings over the next 1-2 years so that investors can rack up some good quality stocks should this sector drop significantly.
Our top picks in this industry include HCL Tech, Persistent Systems, and Mindtree.
4) Renewable sector: The renewable energy sector may be the next big thing in the Indian equity market. The renewable energy sector is expected to cross $ 15 billion in investments in 2022, as predicted by Union Minister for Electricity and Renewable Energy RK Singh. The ministry also announced that it will impose a basic customs duty (BCD) of 40% on solar modules and 25% on solar cells from April 1, 2022. Currently, there is no BCD on these articles. This will boost domestic manufacturing in the renewable energy sector. In 2022, the country plans to reach 175 GW of installed capacity of renewable energy, in accordance with the Paris agreement on climate change. India aims to reach a capacity of 500 Gw by 2030. As of November 30, 52 solar parks have been sanctioned with a cumulative capacity of 37.92 GW in 14 states.
Our top picks in this industry include Tata Power.
5) National manufacture: India has the potential to become the hub of global manufacturing by 2030. The introduction of the PLI program to boost domestic manufacturing which is in line with PM Modi’s vision of bharat âMake in Indiaâ is at the center of the agenda. concerns. An additional allocation can be expected in this scheme in the next budget. Many international companies like Zoho and Wistron Corp have announced strategic partnerships with Indian companies and will invest in R&D in the manufacturing sector.
Our top picks in this industry include Dixon, Polycab, Mold Tek Packaging.
6) Infrastructure sector: The infrastructure sector is also expected to experience growth during this calendar year. Last year the government allocated a record amount of rail infrastructure. Similar allocations are also expected in the next budget. India is expected to become the third largest construction market in 2022. Government initiatives such as Prime Minister Gati shakti, the national infrastructure pipeline and national monetization programs aim to accelerate the pace of road construction.
Our top picks in this industry include GR Infraprojects and L&T.
7) Real estate: There is certainly a structural shift in the space as the residential sector is expected to grow significantly, with the central government aiming to build 20 million affordable housing units in urban areas across the country by 2022, as part of the ambitious Pradhan Mantri Awas Yojana program (PMAY). The current housing shortage in urban areas is estimated at around 10 million units. 25 million more affordable housing units are needed by 2030 to meet the growing urban population of the country. Retail, hospitality and commercial real estate are also experiencing significant growth, providing much needed infrastructure for India’s growing needs.
Our top picks in this area include Brigade Enterprises, Sobha Ltd, Prestige Estates.
(Mohit Nigam is responsible – PMS, Hem Securities)
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Posted on: Friday December 31, 2021 10:37 am IST