Share market valuations rich but growth story intact; IT, real estate may do well in 2022 | 5paisa INTERVIEW

Fundamentals of domestic equity markets remain strong with economic recovery on track, said Prakarsh Gagdani, CEO, 5paisa.com.

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Prakarsh Gagdani believes that valuations may be seen as slightly expensive in the near term but added that any correction from here on would not be large. (Image: REUTERS)

Fundamentals of domestic equity markets remain strong with economic recovery on track, said Prakarsh Gagdani, CEO, 5paisa.com in an interview with Kshitij Bhargava of Financial Express Online. Prakarsh Gagdani believes that valuations may be seen as slightly expensive in the near term but added that any correction from here on would not be large. He discussed what sectors he believes are poised to do well in 2022, and shared the brokerage industry’s performance in 2021 and an outlook for the sector in 2022. Here are the edited excerpts:

There have been concerns about domestic market valuations after a sharp up-move, do you think valuations are expensive?
Indian equity markets fundamentals still remain strong. The economic recovery is on track and is the best among large economies. There have been many corporate earnings upgrades in the last quarter and we may few more soon. All these indicate a largely acceptable valuation for the markets. However, the spread of Omicron variant and gradual reduction of easy monetary policies by central banks led by US Federal Reserve has been weighing. In the near term, the valuations may be seen as slightly expensive and we may see some corrections as foreign money may continue moving out and find some cheaper emerging economies as a destination. However, Indian equities will catch up soon, maybe within a quarter and growth should be strong. Corrections from this stage should not be large and range between 7%-10%.

IPOs flooded Dalal Street in 2021, new-age companies that are yet to turn profitable got listed at high valuations. Do you think those are justifiable?
The year 2021 has seen a maximum number of IPOs coming in a long time. The time has changed and there are a lot of start-ups are getting listed despite being a loss-making entity. Though I feel that there is definitely a risk involved on the sustenance of the business, on the other hand, there are businesses tht have strong revenue models, dominant or monopolistic market share, and a large market to cater to. Such businesses at some point will become profitable and hence should command a premium value.

How has the growth in terms of clients been for you? Do you believe more client acquisitions will be strong in 2022?
The year 2021 has been a great year for the industry as a whole. In fact, it has been better than 2020. We acquired 7.23 lakh customers in 2020 (2019 was 2.64 lacs). In 2021 we will end up with more than 12 lakh clients. So if you see, our acquisition growth has increased by almost 6X as compared to 2019. 
Post our fund-raise of Rs 250 crore in April this year we restarted our focus on growth. Every quarter now we are acquiring more customers than previous one. We are entering 2022 on a positive note and I am confident that we will see more than 100% growth in our customer base in 2022. Our aim is to reach 0.5 Million account acquisitions every month and I am confident that we will achieve it in near future.

What do you believe will be the key sectors that investors should watch out for in 2022?
IT will lead the investment themes in 2022. Strong economic recovery across the developed world led by the US would boost demand for sustained digital transformation across industries and will help the Indian IT and ITES sector. IT would also have a currency tailwind because with China loosening monetary policy its currency may depreciate and lead a round of depreciation of EM currencies and hence Indian rupee could also lose ground against the dollar helping the IT sector.
Chemicals will continue to benefit from China + 1 playing out. Government revenues will be strong and will help with continuation of capex emphasis and therefore infrastructure construction will be strong and construction companies will see good order film. A new wave of covid-19 will bring in its wake a demand for acute therapies for another year. India’s inclusion in global bond indices may draw large foreign currency inflows and help keep interest rates low and help with the continued momentum in the real estate and housing sector. Global commodities could stay firm and during such periods capex cycles accelerates and India could also see this. Companies like L&T will do well. 

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