Nifty may deliver around 12-15% returns in 2022 on account of continuation of economic recovery and strong earnings growth. Currently, Nifty is trading at nearly 20x 12-month forward PE which is no longer in the expensive zone, and while the market trend may be volatile in the near term on account of potential risk from Omicron variant and fragile global cues, strong earnings along with positive macroeconomic data is likely to drive markets upwards in the long run, said Motilal Oswal Broking and Distribution in its outlook report
Indian equity markets had a stellar run this year with Nifty up around 22%. Nifty Midcap 100 and Nifty Smallcap 100 sharply outperformed with gains of around 43% and 53% respectively. Despite the sharp correction recently, India remains among the top performers this year. The momentum is likely to continue next year. “Going ahead we remain optimistic and expect the Nifty to deliver around 12-15% returns in 2022, supported by continuation of economic recovery and strong earnings growth,” said Motilal Oswal Broking and Distribution. IT, Telecom, Capital Goods, Cement and Real Estate are some of the sectors that are likely to do well next year, while Banking and Auto that have underperformed the market so far, have the potential to outperform, it said.
Top stock picks for 2022 by Motilal Oswal Broking and Distribution
Large Caps: Tata Consultancy Services (TCS), ICICI Bank, Bharti Airtel, Larsen and Toubro (L&T), Godrej Consumer Products, Divi’s Labs, Titan, Tata Motors, Reliance Industries Ltd (RIL) and Apollo Hospital
Mid Caps: Angel One, Macrotech Developers, Ramco Cement, Zensar Tech and Devyani International.
It expects the strong growth momentum to continue in the foreseeable future as the new earnings cycle begins. Nifty EPS is expected to grow at 35% in FY22 and 19% in FY23 to Rs 730 and Rs 873 respectively, after delivering 15% growth in FY21.
Earlier this year in October, Nifty50 index touched a record high of 18,600 in October, on account of decline in COVID cases, a significant pickup in the pace of vaccination, and the sharp recovery in economic activity. Consistently positive earnings delivered by many index constituents also led to rerating and rally in the market. However, after touching its new high in October, Nifty corrected over 10% in the last two months, on the back of Fed’s taper announcement, rising bond yields, higher commodity prices, and strengthening of the US Dollar Index.
FIIs turned big sellers and have been consistently selling since October, selling over Rs 90,000 crore in secondary market this year. However it was counterbalanced by DIIs who have been consistent buyers in the market, buying over Rs 90,000 crore, along with the record participation by the retail investors in India. On the domestic front, the economy is witnessing a sustained pick-up, with several high frequency indicators crossing pre-COVID levels.
Corporate earnings since 2QFY21 has also exceeded expectations. A big fundraise in the primary market also put some pressure on the secondary market this year. A total of 63 companies raised Rs 1.19 lakh crore through IPOs in 2021, making it the highest ever fundraise in a particular year. Several new-age digital companies like Paytm, Nykaa, Policy Bazaar, Zomato, etc. got listed this year and several more lined up ahead.