Some of the companies who are likely to come out with an IPO in the near future include well-known names like OLA, Flipkart, Pharmeasy, Byjus, FlipKart, and SnapDeal which investors can look forward to, Jyoti Roy - DVP- Equity Strategist, Angel One Ltd – said in an interview with Zeebiz’s Kshitij Anand.  

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

See Zee Business Live TV Streaming Below:

In an interview with Zeebiz's Kshitij Anand, Roy said that despite the near-term volatility, we remain positive on the markets from a one-year perspective and believe that the near-term volatility will provide a good entry point in the market.

Edited Excerpts:

Q) Omicron, US Fed taper fear infuse volatility in markets. Where do you see markets in the next 12 months or so?

A) While the US Fed tapering has been along expected lines and is largely factored in by the markets, the threat from the Omicron strain has led to a sharp increase in volatility in the last one week.

Going by what’s happening in South Africa, it is evident that the new Omicron variant is very infectious though possibly less severe than the Delta variant.

However, given that it is still very early days, we expect volatility levels to remain elevated in the near term till we have more clarity about the spread of the virus globally.

While there will be some impact on the recovery process in case we have a third wave in India, the impact will be lower than the second wave and we expect a quick recovery post any possible third wave.

All in all, we expect volatility levels will remain elevated over the next 2-3 months due to tapering and fear of a third wave.

Despite the near-term volatility, we remain positive on the markets from a one-year perspective and believe that the near-term volatility will provide a good entry point in the market.

However, post the spectacular rally from Mar’20 investors need to moderate their return expectations from here on.

Q) The Budget 2022 is also a few months away. What are your expectations from the Budget? Do you think it will be a populist one that could hurt the fiscal math of the government which is already strained due to COVID?

A) We expect the Government will continue to focus on reviving growth in FY2023 and expect the fiscal deficit to track the targeted deficit as per the FRBM guideline.

The Governments focus on growth is evident from the fact that they have sought parliament approval for net additional spending of Rs. 3 lakh crore in FY2022.

Despite the increase in budgetary outlay for FY2022, fiscal deficit is unlikely to deteriorate significantly from the targeted 6.8% given that tax collections have been ahead of estimates till Oct’21.

Q) Which sectors are likely to hog the limelight in Budget 2022?

A) We expect that the Government will continue with its focus on infrastructure and rural economy in FY2023 and therefore expect sectors like agrochemicals, cement & building material, construction, and real estate will be in limelight during the budget

Q) The year 2021 will also go down as a year of IPOs when many niche or new-age businesses got listed. How do you sum up 2021 in terms of primary markets and your outlook for 2022?

A) We have had a tremendous year in terms of primary market issuances with many new age companies like Zomato & Nykaa listing on the bourses.

While listing of new-age tech companies may have dominated the headlines, the IPOs have been well spread out across other sectors like consumption, chemicals, financial services, pharma & healthcare etc.

Moreover, the LIC IPO which will be the largest IPO till date is also expected to hit the markets in the fourth quarter of FY2022.

Post the record amount of capital raising in FY2022 we believe that there is going to be a slowdown in primary market issuances in FY2023 given that liquidity conditions are going to be tighter post the US fed tapering which is expected to be complete by the second quarter of CY2022.

Post IPOs of well know names like Zomato, Nykaa and Policy Baazar, we expect more new age tech companies to come out with IPOs over the next few years.

Some of the companies that are likely to come out with an IPO in the near future include well-known names like OLA, Flipkart, Pharmeasy, Byjus, Flipkart, and SnapDeal which investors can look forward to.

Q) The year 2021 was a volatile year but bulls managed to remain in control. How do you look 2021 – key highlights which stand out from a market, fund or business perspective?

A) There was some amount of volatility in 2021 due to the second Covid wave early on in the year while tapering and fear of a third Covid wave is leading to increased volatility towards the end of the year.

Despite the volatility, key highlight for FY2021 was the strong and V-shaped recovery post the second wave which resulted in the economy recovering to its pre Covid levels indicates resilience in the economy.

Q) FIIs remain mostly net sellers especially when it comes to the cash segment of Indian equity markets. How are FIIs looking at India in the light of sooner than expected tapering from the US Fed?

A) We believe that the US Fed tapering will result in a slowdown in FII inflows and maybe even some outflows. We have actually witnessed an outflow of Rs. 26,800 crore so far in the second half of 2021 as compared to inflows of Rs. 60,300 crore in the 1H2021.

However, we believe that domestic flows will more than make up for any slowdown in FII flows given that mutual fund flows have been strong at Rs. 57,229 crore the first eight months of FY2022 which is expected to continue.

Moreover, one of the key highlights of the post-Covid rally has been the sharp increase in direct retail participation which is reflected in the doubling of has almost doubled from 2.6% at the end of FY20 to 5.1% by 1HFY22. Continued MF flows and an increase in direct retail participation will

Q) Which sectors are likely to hog the limelight in the year 2022?

A) From a sector perspective we expect the banking sector to do well in 2022 given a strong rebound in earnings in FY2023 due to the pickup in AUM growth and decline in provisioning.

We also expect sectors like aviation, consumer durables, hotels, multiplexes, and real estate to do well on the back of strong earnings growth in FY2023 due to further reopening of the economy and pent-up demand.

We are also positive on CVs, cement, and building materials given that they will be the biggest beneficiaries of the Government's focus on infrastructure and housing.

Q) Any particular theme that remained in limelight in 2021 and could well remain relevant and in demand in 2022 as well and why?

A) IT and chemicals have been two sectors that had been in the limelight in 2021 and we expect both the sectors will continue to well in 2022.

We believe that the IT sector will continue to do well going forward despite significant rerating over the past one year given the structural upshift in growth trajectory over the next 3-5 years.

The specialty chemical sector will do well given that it would be one of the biggest beneficiaries of China plus one strategy as global companies look to diversify their supply chain.

Q) What were your key learnings from markets in 2021 which investors should take note off?

A) One of the key learnings from the markets in 2021 is that investors need to remain invested in the markets despite any short-term volatility.

In the long run, returns are a function of the time spent in markets rather than a function of timing the markets. Hence, it is important for investors to remain invested in the markets rather than try and trade the markets.

Q) What are the Key risks that investors have to face in 2022?

A) Key risks for the markets in 2022 are s bigger than expected third Covid wave in India which impacts the recovery process and a further increases in global inflation from current levels forcing central banks to tighten earlier than expected.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)