The initial phase of 2022 will see only a muted beginning, said Motilal Oswal Asset Management Company.

2021 has been one of the most active years for IPO with digital companies making their debut and lapping up a vast proportion of the new money. Also, the markets have been in an uptrend barring last couple of months. With inflation moving up and the Fed showing its intentions to tighten liquidity, markets in last couple of months have been a bit volatile with FIIs being sellers almost on a daily basis, it said.

Hence, 2022 is starting with an expectation of tightening liquidity, increasing interest rates and uncertainty around Covid still remaining.

"However, on the brighter side, economy is showing strength and the corporate earning cycle is on an uptrend. With two opposing themes playing around, I would expect 2022 to be much more range bound for the broader markets; however, some of the sectors may do really well," said Santosh Kumar Singh, Head of Research, Motilal Oswal Asset Management Company.

Outperfoming sectors

According to Singh, real estate (witnessing big revival), financials (large banks are well placed on credit quality front) and pharma (due to structural play) are expected to outperform in 2022.

Motilal Oswal AMC said digitisation and capex themes may continue to play out well in 2022 as well.

Digitisation of the economy was the predominant theme during CY21 with IPOs of multiple new age digital companies. Digitisation has also meant that the Indian IT companies are growing at the fastest pace seen over last decade. "We may see this theme to remain one of the predominant one during next year as well."

Both private capex as well as household capex were missing for last 5 years. "We can see a revival driven by lower interest rates and pent up demand. Also, government will have to focus on job creation which may lead to higher capex."

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