Srinivas Rao Ravuri, Chief Investment Officer at PGIM India MF says one should reduce expectations from Budget announcements. “The government has been announcing several measures to lift economic growth, and we expect this trend to continue. They don’t need to wait for the Budget.”
The primary market has been buoyant in the year 2021 with 65 companies launching public issues worth Rs 1.31 lakh crore. But, “the year 2022 would be a challenging year for investors and companies planning IPOs,” says Ravuri who has more than 24 years of experience in the investment industry.
Most of experts feel the government could list LIC in the last quarter of FY22. Srinivas says the listing of LIC can be a watershed moment for capital markets on multiple fronts, including bringing greater transparency into the country’s largest financier.
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?
We are living in a fast-paced world. After an extremely volatile 2020, things were getting back to normal in early 2021. Then we were hit by the second wave. Still, stock markets have shown remarkable resilience supported by steady economic recovery and strong earnings growth.
The surge in inflows into markets where retail investors took fancy to investing aided this buoyancy. Key events to look out for 2022 are a) trend in interest rates b) FII flows c) trend in corporate earnings growth.
FIIs were net sellers in the year 2021, offloading more than Rs 80,000 crore worth of shares in cash market, 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?
We expect continued selling by FIIs in the near-term as tapering and rate hikes would spook sentiments towards emerging markets, including India.
DIIs buying is driven by steady inflows from retail investors as the financialization of savings got accelerated. Recency bias is also playing a role in these inflows. As people have made healthy returns in the last 18 months, investors have become comfortable with equities and equity mutual funds. Most investors are sitting on healthy profits, so one can expect steady inflows even after corrections.
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?
Click Here To Know All IPO Related News
The IPO market has become Seller’s market as markets have been buoyant, and some IPOs delivered great returns on listing. We have avoided participating in the majority of the companies that went public recently as we find either valuations are expensive or business fundamentals are inferior. We believe 2022 would be a challenging year for investors and companies planning IPOs.
Companies will start reporting corporate earnings for December quarter from January onwards. What are your broad expectations and do you expect Q3 to be much better than Q2 or is there any risk of higher commodity prices to numbers?
We expect corporate India to report healthy earning growth in Q3 (Bloomberg consensus is 30 percent YoY growth, 3 percent sequential growth for Nifty50), though they will no longer have the benefit of lower base quarter.
We have witnessed very sharp increase in commodity prices and logistic costs in recent month. Both have started cooling off, so we would see some impact in Q3 but directionally things are getting better.
The government has consistently been announcing several measures to lift the economic growth. Do you expect any significant announcement in the Union Budget 2022?
The government has been announcing several measures to lift economic growth, and we expect this trend to continue. They don’t need to wait for the Budget. We should reduce expectations from Budget announcements.
The street is largely expecting 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?
Listing of LIC can be a watershed moment for capital markets on multiple fronts, including bringing greater transparency into the country’s largest financier. The government has been trying to divest more, but it is not easy.
We believe recently announced National Monetization Pipeline is an ideal way to raise resources & improve efficiencies at state owned enterprises.
What should investors learn from the year 2021 that has seen strong rally, created several multibaggers, higher commodity prices and many more things?
Learning is a continuous journey in investing. The year 2021 has been the epitome of investing. Markets started rallying much before fundamentals began improving, and as markets remain buoyant, we have started in excesses in certain pockets, including IPOs.
And now we are witnessing a correction as concerns emerge on multiple fronts. Overall, asset allocation (staying invested in equities), patience, and homework are most important lessons.
Have you spotted themes that investors should add in their portfolio for 2022 and why?
We continue to remain positive on digitization, healthcare and manufacturing themes.
How have REITs performed post pandemic, and some media reports are suggesting that Budget could relax capital gains norms for REITs and InvITs. What are your views?
REITs (Real Estate Investment Trust) offer an excellent way to participate in the real estate asset class. Globally, REITs have beaten other asset classes in return over extended periods. Any steps aimed at making this more attractive is positive for investors and the sector.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
