The banking, financial services, technology, housing and insurance sectors will be the main drivers of the market due to their improved outlook and the current lower interest rate regime.
Through Ravi Singh
In 2021, the stock markets saw a historic movement as benchmarks hit new lifetime highs with 18,000 and 60,000 for the first time in history. The key factors to drive the market in 2021 have been improving macroeconomic indicators, strong global liquidity, increasing economic activities, significant resumption of vaccination, improving consumption data, easing monetary policy and the strong recovery in corporate profits.
Mid and small caps have significantly underperformed large caps for the past 3 years. Being cheaper than large caps, mid and small caps have grown much faster in an economic recovery compared to large caps. BSE 500’s Balaji Amines, Happiest Minds Technologies and Deepak Fertilizers Petrochemicals generated huge returns in 2021 and are qualified as 2021 multi-sealers. ICDS, Mastek and Route Mobile among the small and mid cap segment also outperformed the market. The increased interest of REITs and the participation of retailers in these segments as well as monetary liquidity for an infrastructure push by the government will benefit sectors in the longer term.
In 2021, banking, infrastructure, IT, automobiles, metals and pharmaceuticals were among the top sectors that generated significant returns for investors. With other government structural reforms in manufacturing and infrastructure still underway, we expect mid and small cap stocks to outperform next year as well. Additionally, as the business cycle has accelerated and the recovery in corporate earnings is strong, we expect the same strength to continue into 2022.
The banking, financial services, technology, housing and insurance sectors will be the main drivers of the market due to their improved outlook, current lower interest rate regime and increased spending. public. The energy, railways and oil and gas sectors will remain attractive in the medium to long term.
Other sectors like travel, tourism, leisure, real estate, and ancillary companies like cement and other building material companies are also expected to contribute in 2022. This optimism also reflected positively on the charts. techniques.
However, given the prospect of a further rise in inflation, chances are that most central banks will raise interest rates to dampen liquidity. Growing uncertainty and fear over Omicron would boost market momentum next year.
2021 has been a tremendous year in terms of return on stock market investments, but 2022 looks to be more difficult.
Best stock picks for 2022
1. CGSB – The 62% increase in natural gas prices by the Indian government will increase the profitability of companies. Higher crude prices, along with modest 5-7% growth in the company’s production volume, could push its EBITDA up next year. We estimate that the company’s debt to EBITDA ratio will strengthen to around 1.6x to 1.9x over this period. Technically too, most indicators like MA, RSI, MACD and Stochastic are trending on the daily chart. We expect CGSB to hit the 170 level next year.
2. GAIL (INDIA) – Improving profits, supported by higher volumes in all segments, supported by increased marketing profits due to rising gas prices, could boost Gail next year. The increase in production after a shutdown in the previous quarter supported petrochemical volumes. An increase in gas consumption has supported transport volumes, which will further strengthen profits. On the daily chart, the Gail share has very strong support around 140 levels and the 200 day MA is supporting the buy trend. Also, the RSI is in its lower zone, so we would expect Gail to hit the 165 target in the near term.
3. HDFC Bank – Strong capitalization, improved liquidity, reduced NPAs and robust earnings make HDFC Bank a good investment choice for Samvat 2078. HDFC Bank share price is trading above its 100/200 DEMA levels in the daily chart. The stock price is placed above the Parabolic SAR on weekly charts which suggest a positive trend. The target for next year is around 1750.
4. TCS – The tech sector is in good hands overall due to the strengthening dollar, digitalisation and improved business growth which is also expected to continue next year. Tata Consultancy Services’ stock price is trading above average with the upper band pointing north indicating that the price will rise. By analyzing recent volume price action, volume encouraged the recent upward movement indicating that strong hands have started to build the stock up to current levels. Most oscillators indicate the intact uptrend of the stock. We expect the TCS to meet the target of 3600 by Samvat 2078.
5. SBI (State Bank of India) – is currently trading mainly futures MAs such as 25 DMA, 50 DMA, 100 DMA and 200 DMA, which confirms the positive dynamics. Also, RSI, MACD, ADX are trading in a comfortable zone indicating an uptrend of the stock. We can also expect the meter to continue to outperform in the coming months and could move towards 600 levels in the long term.
(Ravi Singh is Vice President and Chief Research Officer, ShareIndia Securities. The opinions expressed are those of the author.)
Financial Express is now on Telegram. Click here to join our channel and stay up to date with the latest news and updates from Biz.