Harshad Chetanwala
After gaining 24 percent in 2021, the markets are expected to remain strong in CY22, predominantly riding on robust growth and demand across sectors, says Harshad Chetanwala, co-founder of MyWealthGrowth.com. “The Nifty50 can be at around 20,000 by the end of the year if all goes well, but expecting the index to touch 20,000 by mid-year could be optimistic considering present factors,” he told Moneycontrol.
On the Union Budget, he says the real impact of the budget on stock markets will be seen when the policies and announcements focus on long-term growth of the economy. “Divestment and monetisation of PSUs should gain more traction as there are a few more PSUs where divestment is still pending.”
Edited excerpts from the interaction follow:
Earnings season was kicked off by IT companies and HDFC Bank this week. Do you expect a significant earnings upgrade after the Q3 results?
The overall recovery had gained reasonable pace in the quarter ended December. However, the beginning of the third wave in India due to the Omicron variant, just at the start of the new calendar year, will need to be looked at more closely.
While strict restrictions are not expected, if the number of cases piles up continuously and the authorities implement any kind of lockdown it can impact growth estimates for the coming quarters.
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The IT sector has shown remarkable growth throughout the Covid crisis, with volume growth showing strong momentum. But at the same time, employee costs have been inching up and that has put some short-term margin pressure, which should ease as new deal wins have been healthy.
Which sectors will report double digit profit and revenue growth in Q3 on a year-on-year basis and which sectors will register negative profit growth on a year-on-year basis?
Banks, Metals, Oil & Gas, Retail and IT are the sectors expected to report a good growth rate for Q3 on a year-on-year basis. High inflation and input costs could affect the numbers for the Auto, Cement, Real Estate and Pharma sectors.
The Union Budget is the next key event to watch out for. What are the key focus areas and will it be a game changer?
The real impact of the budget on stock markets will be seen when policies and announcements focus on the long-term growth of the economy. It is important to continue the efforts that were announced in the previous year’s budget, particularly on the infrastructure and healthcare front.
Divestment and monetisation of PSUs should gain more traction as there are a few more PSUs where divestment is still pending. There are always expectations on the personal tax front, which can help put more surplus in the hands of taxpayers, resulting in higher consumption.
Which are the sectors to bet on ahead of Union Budget 2022 and why?
While this is not specifically from a Budget perspective, overall we do expect sectors like IT, Banking, Auto, Real Estate and Metal to do well for investors in 2022 as well. Sectors like Auto and Real Estate will get the benefits of normalcy picking up pace and consumer confidence increasing over the year.
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Initial numbers released by banks generated confidence among market participants in the last few days. Is this the right time to add banking stocks in a portfolio or should one wait for actual Q3 earnings?
Banks have been expected to do well for quite some time now. They continue to be well-capitalised and could do well in future as well as economic activities gain traction and credit growth improves. Also, on the quality of assets, the situation looks more in control as the overall impact of Covid has been lower than originally anticipated. Large-cap banks in our view are where one can continue to remain invested or consider investing more gradually.
Last week US 10-year bond yields spiked amid expectations of faster policy tightening and rate hikes in 2022. Do you think the US 10-year bond yields could cross the 2 percent mark soon?
US 10-year bond yields have seen a sharp spike. However, they are expected to cross the 2 percent mark by the end of CY22 and any further rise is expected to be gradual.
Do you see the Nifty50 crossing the 20,000 mark in the first half of CY22, and if so, why?
The markets are expected to remain strong in CY22, predominantly riding on robust growth and demand across different sectors. Over the previous two calendar years, the markets have given a 15 percent and 24 percent return, respectively, and the 20,000 level is around 11 percent from where the Nifty50 stands today. While the index can be around that level by the end of the year if all goes well, expecting it to touch 20,000 by mid-year could be optimistic considering present factors.
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