In Budget 2021, the government had promised divestment in LIC via IPO and experts expect that to take place in Q4FY22. Narendra Solanki, Head-Equity Research (Fundamental) at Anand Rathi Shares & Stock Brokers told Moneycontrol that the government would continue to focus on divestment and monetisation in Union Budget 2022 as well.
“The pending big ticket divestment apart from IPO of LIC, include IDBI Bank, Bharat Petroleum Corporation, Pawan Hans, Shipping Corporation of India, BEML, Container Corporation of India, among others,” he detailed.
On the markets, Solanki, who has over 13 years of experience in the market, said from here on, the markets would perform but returns could be lower than current year due to high base. “Equities as a class would continue to outperform.”
How do you sum up the year 2021 that priced in and saw several key events? What are the key events to watch out for in the year 2022?
I think broadly the year 2021 was good both in terms of performance of broader markets. We started off positively as the first wave waned off but sooner than later the country was hit by a second and more devastating wave which led to harsher lockdowns across the country. About midway into the year we saw good news in terms of vaccination availability and some respite from the second wave followed by gradual improvements in macro-economic data as the unlock theme played out.
Markets, too, showed smart recovery and priced in faster recovery from covid and in last quarter of the year we have seen key indices hitting all-time highs.
Coming to the key future events, one immediate event is the Omicron variant of Covid of which much clarity is not available but is seen as a variant of concern as it has higher infectiousness. So, development around new variants and vaccine availability for the same is a crucial near term event.
Coming to economic aspects, one needs to watch out for how the world or to say so developed markets handle inflation. Although the US Fed has already provided its guidance around the same, the execution and timing of the same needs to be seen and its impact on global short-term liquidity flows.
FIIs were net sellers in the year 2021, offloading more than Rs 80,000 crore worth of shares, but DIIs managed to offset loss by buying similar worth of shares during the year. What could be reasons for both the sides (FIIs and DIIs) and will the FII continue to get impacted amid faster bond tapering and rising expectations for rate hikes in the US?
There are various types of funds and strategies within the overall FII category which includes passive funds, ETFs, long term funds and short term arbitrage funds. So, a lot of factors depend on why FIIs are selling with few primary being short term arbitrage and passive funds which are more reactionary on global macro events.
Coming to the US Fed’s tightening, yes there may be some impact as far as liquidity is concerned but it’s very early to quantify the same and also since the market was already expecting some liquidity withdrawal since past few weeks so some selling also might have already happened.
DIIs flows should continue to remain strong as domestic factors remain stable and retail participation is also very encouraging.
How do you sum up the primary market that saw fund raising of more than Rs 1.3 lakh crore in the year 2021? Do you expect similar kind of fund raising in 2022 and can you name the companies that are planning IPOs in 2022?
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The IPO market in 2021 was very robust and vibrant and on average we have seen more than five new issues hitting every month.
For next year 2022, the primary market should continue to remain active and vibrant with a lot of new issues lined up especially from new age tech and fin-tech spaces. Few of the probable are LIC, More Retail, Mobikwik, Ola, Delhivery, Byju’s etc.
The street is largely expecting the LIC IPO in the last quarter of FY22. Do you expect the government to continue to focus on other divestment and monetisation of assets in the Union Budget 2022 as well? Can you name the companies that can be on government’s agenda for divestment or monetisation?
Yes, we feel the government would continue to focus on divestment and monetisation. The pending big ticket divestment apart from IPO of LIC, include IDBI Bank, Bharat Petroleum Corporation, Pawan Hans, Shipping Corporation of India, BEML, Container Corporation of India, among others and lately PDIL and HLL Life Care also joined the list. There are many companies where the government has given “in-principle” approval for disinvestment.
What should investors learn from the year 2021 that has seen strong rally, created several multibaggers, higher commodity prices and many more things?
We think markets continue to remain structurally positive, however, since last year markets were recovering from Covid shock hence the returns were high. Now from here onwards markets would perform but returns could be lower than current year due to high base. Having said that, equities as a class would continue to outperform.
Investors should continue to focus on growth, value and quality stocks.
Have you spotted themes that investors should add in their portfolio for 2022 and why?
We think IT, Tech and Digital themes should continue to perform well along with spaces like specialty chemicals, manufacturing, Banks should also do well. Consumer, durables and infra should market perform.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
