What is the Strongest Sector to Invest in the Stock Market In India 2022?
2021 was an amazing year for the market. NIFTY and SENSEX, both ended in all-time highs, with FinTech, Electronic Vehicles and digital industry at the forefront. In fact, SENSEX broke the 50,000 mark for the first time ever, and peaked at a whopping 61,765.59 on the 18th of October.
Many investors recall the famous Warren Buffett Quote - "It is wise for investors to be fearful when others are greedy, and greedy when others are fearful". Mixed with the overwhelming highs of 2021, many are starting to wonder
How will the stock market in India be in 2022? No way the stock market performs just as well in 2022 - right?
In this article, we will breakdown everything you need to know, and some predictions on how the stock market will perform in 2022.
Stock Market in India 2022 - Predictions
2022 seems more promising for the stock market, and looks all set to be an even better year than 2021. Despite the initial hiccup early 2020, with the initial outbreak of the COVID-19 pandemic, the market has generally performed well, with many unicorns on the horizon. India Times wrote "as if wanting to be an antidote to the coronavirus pandemic, the Indian Stock Market adorned carnival robes in 2021".
Several experts have already predicted that the Indian stock market will soon become the 5th highest in terms of market capitalization, surpassing the United Kingdom in this very year - and by the looks of it this prediction is well on it's way to becoming true. Just over the last year, a whopping 72 lakh crores was added to the country's market capitalization, taking India's total market cap to 260 lakh crores.
Market experts have chalked this to the unprecedented levels of liquidity across the globe - which has induced an "everything bubble". Prices of all assets, irrespective of the market and asset classes have increased across the board. The Reserve Bank of India has worked with the government to ensure that the pandemic doesn't dampen the economy over the last couple of years.
Incentive schemes like PM Gati Shakthi Master Plan for INR 100 lakh crores for infra development, asset monetization pipeline, etc., have further contributed to the growth.
Despite the looming fears of the Omicron variant of the coronavirus, the massive vaccination drives have ensured that the economy did not remain locked down for an extended period of time.
According to Nitin Raheja, ED, Head - Discretionary Equities, Julius Baer "Multi-year Low interest rates, new generation reforms, adequate availability of capital and the revival of the real estate sector have created the framework for a multi-year earnings growth cycle".
Yes. Multi-year.
We know what the popular Warren Buffett quote says, but the market is about to get a lot more liquidity. With the LIC IPO right around the corner, and the government expecting over 1 crore new Demat accounts to be created - the market is flooded with opportunities.
Sectors That We Predict Will Flourish
This one is a no-brainer. All the eyes are on the LIC IPO, scheduled to begin in March of 2022. With the Modi Government pushing for an INR 15 Crore Valuation, LIC is all set to become one of the biggest companies in India in terms of market capitalization. If you can get your hands on the IPO, especially with the specialized quota for policyholders, it could very well be your best investment decision of 2022.
However, it doesn't stop there. Though a lot of new Demat accounts would be created, not all of them will be able to invest in the LIC IPO. The IPO is highly likely to be oversubscribed, and plenty of fresh Demat account holders will be all set to invest in companies operating in the same field as LIC - the Insurance sector. Stocks like Reliance General Insurance, Reliance Nippon Life Insurance and Max Life Insurance can see significant upward movement in the upcoming year.
Almost a quarter of the total capital investment that happens in the economy invariably is in the housing sector. With record low interest rates and tax schemes for both retail buyers and real estate developers has seen a massive increase in the valuation of the housing sector as a whole in 2021. That trend is set to continue into 2022, as this year's budget kept up the spotlight, front and center, into affordable housing.
Other Real Estate Sectors - like retail and hospitality might also follow suit, but as such received no other stimuli, or benefits from the recently concluded budget. The Real Estate sector as a whole has recovered significantly from the pandemic lulls. While the average sales are yet to reach the Pre-COVID levels, experts strongly believe the utilization of digital marketing, virtual tours, online registration and other contactless, digital efforts, this shortage will be short-lived.
This is particularly evident in cities like Pune, Hyderabad, Bangalore, Ahmedabad and Mumbai.
Commercial real estate was expected to under-perform, going into 2021, but with the growing popularity of hybrid workforces, coworking and managed office spaces are gaining increasing popularity, even in tier 2/3 cities showing real strong signs in the sector.
Oh, the irony. Despite the world facing troubles on the healthcare front, the healthcare industry has flourished a lot in the last couple of years. The COVID 19 pandemic brought into light several shortcomings and vulnerabilities in the healthcare sector, that have been since corrected, and accounted for. According to HIMSS (Healthcare Information and Management Systems Society, over 80% of all healthcare systems are looking to expand their investments into digital healthcare.
HealthTech is all the buzz right now, leading to many experts believing that the healthcare industry might very well reach the $372 billion mark by the end of this year. Hospital industries are expected to grow at 20% CAGR, and make up a significant 80% of the market volume.
With the increased vaccine drives, the returns for pharmaceutical companies are nothing to scoff at either, and these numbers don't show any signs of slowing down anytime soon.
People have realized just how important healthcare is, over the last couple of years, and we can expect the healthcare and pharmaceutical industry to go on strong for the foreseeable future.
The Indian automobile sector is finally all set to make a resurgence in the year 2022. Despite the turmoils of the COVID-19 pandemic, which surfaced severe vulnerabilities in the supply chain (not to mention the silicon crisis that is still rampant).
Ever since 2018, volumes have gone down significantly for the automobile industry, aptly reflected on the stock prices. However, the industry, as a whole, have taken this time to invest and grow, structurally. Their efforts maybe finally fruitful in the year 2022, which could very well see the first time sales numbers increasing since 2018.
The advent of eco-friendly, sustainable Electric Vehicles has done no harm to this growth story either, along with added governmental schemes (Production Linked Incentive Schemes) - all the gears are in place for the revival of the automobile industry.
If you're looking to invest in the share market in India, chances are, you've already looked at the FinTech sector. With the failure of PayTM IPO being the buzzword for the last couple of months - you must be wondering, FinTech? Really?
Banks, and NBFCs are taking huge leaps forwards, which has especially been the case over the last couple of years. With the government's push towards a Digital India becoming widely successful the financial sector is one of the best sectors to invest in 2022.
Vetri Subramaniam, CIO of the popular Asset Management Company - UTI has the following to say about the finance sector. "It has been the bellweather of this market.... Largest sector in the benchmark indices, but it has obviously gone through a difficult period over the last couple of years, particularly because of the pandemic."
He further noted down three important points as to why he believes the Financial Sector is the sector to invest in 2022.
"This is the first time in almost 20 years, that a handful of banks have been proactive in terms of providing for potential losses." (Nirav Modi vibes intensifies) Vetri is referring to the banks providing for losses in the last quarter of 2020, just when the pandemic began to take its toll. During that time, the different banks not only provided for the losses, but raised capital to strengthen their position further, which was his second point.
"Secondly, they went out and raised capital as a pre-preemptive measure to strengthen their balance sheets"
He was also quick to notice the banks building excess buffers within their P&L, to provide for future losses. "We have not seen this kind of behaviour from the banks in the previous credit cycles in 2013-15, or even In the late 90s. Typically, the attitude was deny, deny, regulatory forbearance and then wait four to five years before you start to clean it up."
"They have built their buffers, they have got high capital adequacy and the trust of depositors". He further adds "The case for incremental growth accruing to them is far stronger than anything I have seen In the last few years."
Hold your horses for a bit, we are going to get a little bold here. With the looming threat of the COVID-19 pandemic finally coming to an end (touch wood), we believe that the travel sector is all set for a revival story in 2022.
Let's face it, for the last couple of years, since the beginning of the pandemic, a vast majority of the players in the tourism sector had to liquidate, or dig deep into their reserves just for survival. But with the widespread success of the vaccination drives across the country, and the resumption of international flights, along with the lifting of mandatory quarantines, the tide is all set to shift in 2022.
Allied services, like hospitality might also see a resurgence, but as the popular saying goes, only time will tell us on this one.
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