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Mumbai: Equities will likely continue to be the best asset class for Indians in the new year after a bumper 2021 but investors must brace for wild swings in the face of a hawkish US Federal Reserve and a tenacious Covid-19 virus.
While stocks could weaken further early in 2022, India's stock benchmarks - the Nifty and the Sensex-are poised to soar to fresh highs this year, according to a majority of participants in an ET poll. Technology, banks and chemicals are among their top picks for the year ..
An ET poll of 23 fund managers and analysts at brokerages showed that 57% expect the Nifty to rise 10-15% in 2022. While 21% expect a 5-10% gain, a minority is forecasting 15-20% returns from current levels.
"This year is starting on a bull wicket as the market has corrected recently. We expect reasonably good performance by markets in 2022 though not bumper returns like 2020," said Raamdeo Agrawal, chairman, Motilal Oswal Financial Services. "In terms of returns, I would think not more than 15%... more like 10-15% returns."
The Nifty ended on a cheerful note on Friday at 17,354.05, logging gains of 24% for the year. The Sensex ended at 58,253.82, up 22% in 2021.
About 42% expect the Nifty to end 2022 at 19,000-20,000, and 33% expect the index at 18,000-19,000. A revival in flows from foreign investors is likely to boost the market, according to 94% of those polled.
44% See Rupee at 75, another 33% at 78
Foreign investors have been sellers in the last three months of 2021, offloading shares worth '36,500 crore during this period, after being net buyers to the tune of '1.19 lakh crore in the first nine months.
As much as 44% see the rupee at 75 to the dollar in 2022, while 33% expect it to touch 78. The rupee closed at 74.29 against the dollar Friday.
The poll showed IT, banks, chemicals, pharma and real estate sector will be this year's top investment themes.
"Banks and IT make more than 50% of profits in the corporate world and both are booming. Both are likely to do very well and are reasonably priced," said Agrawal.
Money managers expect large caps to be in favour this year.
The consensus in the poll was for a 50:40:10 split among largecap, midcap and smallcap.
About 56% of those polled expect the Nifty and Sensex to see a dip in early 2022, with about half of them expecting another 3-5% fall. However, 44% do not expect a further decline from current levels.
"Investors should mellow down their return expectations from equities in the coming year. Coming out of strong outperformance, equity markets need to consolidate," said Vinit Sambre, head of equities at DSP Investment Managers. "The first half for the markets could be lacklustre given the high base effect of December and March quarters and the impact of a third Covid wave."
Indian stock indices ended 2021 with a gain of over 20%. In the last three months of the year, the benchmarks corrected more than 10% from lifetime highs on October 19-- 62,245.43 for the Sensex and 18,604.45 for the Nifty. At close on Friday, the indices were still 7% away from their peaks.
The decline was due to heavy selling by overseas investors amid heated valuations and tightening monetary policies by global central banks-mainly the US Federal Reserve-as well as concern over the new coronavirus variant.