Vinod Nair, Head of Research at Geojit Financial Services advises investors to keep a balanced portfolio with equity exposure in the range of 50 percent to 75 percent. “I suggest a focus on largecaps in sectors like IT, Pharma, FMCG and Telecom,” he said.
In the Union Budget, which is likely to be presented on February 2022, the focus will be on healthcare and areas of sections which are most impacted by fall in income like rural & unprivileged, says Vinod Nair who has around 20 years of experience in equity research.
Edited excerpts:
After more than 11 percent correction from record highs, is it the right time for investors, who missed the bus, to pick quality stocks and do you still expect some more correction?
We are in a correction within the bull rally. The near-term may be dull & volatile. However, I expect we are in the last phase of the correction. The short-term issues are that the broad market valuation which is still in the upper side, change in investment pattern in India & abroad due to hardening of monetary policy, outcome of Union Budget & state elections. Market will do well post the consolidation which we should capitalize on a medium to long-term basis.
What are the stocks/sectors that look attractive for bargain hunting after recent significant correction?
Pharma seems to have undergone a decent consolidation. FMCG & Telecoms are also looking good. IT is in a evergreen rally and has been undergoing a phase of time correction. These and generally largecaps look good position than broad market.
The primary market ended the year 2021 that saw 65 public issues worth Rs 1.31 lakh crore (the record fund raising). How do you sum the year for IPO market and do you expect similar worth of fund raising via IPOs in 2022? Can you name the IPOs (with likely issue size) that are expected to be launched in 2022?
Overall, it will be recorded as one of the best year. Start to the year has been very robust in terms of quality of companies (new age & rising businesses) and pricing. However, it lost the attractiveness by the later part of the year due to excessive pricing and weak business models coming into market to gain from listing. The frothiness of the secondary market has reduced and investors will be choosy in 2022. This will have an effect on IPO offerings. However, government’s divestment plans & upcoming start-ups will continue to have a positive effect. Some names floating in the market to hit IPOs are LIC, Ola, Aadhar Housing Finance, PharmEasy, and Mobikwik.
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CMS Info Systems, HP Adhesives and Supriya Lifescience will debut on the bourses next week? What could be your expectations for listing premium and why?
Supriya Lifescience is a Indian manufacturer and supplier of active pharmaceuticals, focused on diverse therapeutic segments such as antihistamine, analgesic, anaesthetic, vitamin, anti-asthmatic and antiallergic. We are positive on this business and given its strong financial performance (revenue CAGR of around 18 percent, EBITDA CAGR of around 61 percent, and PAT CAGR of around 77 percent over FY19-21), improving margins, export exposure, capacity expansions, increased penetration in regulated markets and promising industry outlook. Compared to the strong financials, business model & peer valuation, the pricing is attractive.
For CMS Infosystems, we have a muted outlook in the future considering the possible decline in usage of cash and ATMs. Banks are planning to cut down the number of ATMs in the future considering the high cost of cash management. Push for digitalization along with demonetization will also result in lower usage of physical cash going forward. The industry is also expected to grow at just 6 percent CAGR. Valuation wise the pricing of the company at 15.8x looks reasonable.
At the age of 25-30 with a balance of Rs 10 lakh, where should one invest in 2022 or how should one allot money in his/her portfolio at the start of 2022 to get healthy returns?
In 2022, I will suggest a balanced portfolio with exposure in a range of 50 percent to 75 percent in equity based on your risk taking capacity. I suggest a focus on largecaps in sectors like IT, Pharma, FMCG and Telecom. Have exposure in future themes like green energy, new generation business, tech-based, Sugar and online based companies. However, be stock specific with focus on business model & pricing. Rest can be invested in Debt with high weight & Gold accordingly.
Now more than a month left for the Union Budget presentation. Do you think it would be a big bang budget and what would be focus areas? Also is there any populist measures given the states elections going ahead?
Being in pandemic, the focus will be on healthcare and areas of sections which are most impacted by fall in income like rural & unprivileged. Including elections, the market is concerned about populist agenda which we feel should not have a impact on long-term fiscal policy. Market expects continuation of high fiscal expenditure with focus on infrastructure, the expectations have increased after the launch of National Infrastructure Pipeline.
In the year 2022, what are the key events and risk factors (global and domestic) to watch out for?
Slowdown in Chinese market is & will affect global growth, however it may be positive for India. How hawkish will be the implementation by world central bank policy will have an effect on investment pattern. Pandemic has weakened fiscal position and increased public debt. Inflation is on the rising mode. Union budget, State elections outcomes and FIIs selling, are short-term domestic factors.
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