From Budget, RBI policy to assembly elections — experts list events to watch out for in 2022

The year 2021 saw stock markets scaling new heights as domestic equity benchmarks scripted history by touching record highs in October 2021. The S&P BSE Sensex breached 61k mark, while the Nifty50 zoomed past 18k for the first time ever in October this year. The Indian markets have been witnessing volatile sessions and seeing corrections since then. Rise of new covid variant Omicron and relentless selling by Foreign Institutional Investors (FIIs), besides mixed global cues were the primary reasons behind this volatility. 

The Sensex and the Nifty witnessed one of the biggest corrections of 2021 when the former shed over 1800 points and the later dipped by nearly 550 points on Monday.  The aforesaid factors were the main triggers pulling down the indices on Monday.

“Amid Covid scare, flurry of IPOs, surge in inflation leading to increase in fuel price, commodities and food products, several start-ups getting unicorns' status kept the street busy this year,” said Manoj Dalmia, Founder and Director, Proficient equities Private limited.

Ravi Singh, head of Research and vice president, Share India, said Nifty50 clocking unprecedented return, a sharp spike in US benchmark 10-year bond yields tripling from 0.512% in August 20 to 1.758% in March-21 and Reliance raising $35 billion by monetising stakes in Jio Platforms to become a zero net-debt company were the top events that shaped the narrative of the markets this year.

As we ring in the new year, there will be several factors that would be driving actions on Dalal Street. From earnings, Union Budget, Assembly elections, RBI policies, geo-political factors to Covid scare, let’s look into triggers that would set the mood of the street in 2022.

“Strong earnings recovery will be the topmost thing that will drive the market rally and consumption may see further momentum across the different verticals after almost 2 years of a down cycle. Picking momentum in asset monetization programs by the government can also improve the sentiments. The government may also try to further push the growth and consumption momentum in the upcoming budget as they are having strong tax collection,” said Sunil Nyati, MD, Swastika Investmart Ltd.

Swastika Investmart Ltd MD said Retail participation has jumped significantly in the last one and half years and it may see a further rise in the coming year, thanks to technology and awareness, which may help sentiments to remain up because we are now not majorly dependent on foreign investors inflow.  
 “If we talk about the risk factors then uncertainty about covid is still there while inflation is another concern otherwise there are no major worries are visible. Geopolitical issues may cause some volatility where Ukraine-Russian and China-Taiwan issues are prominent.  We will have elections in big states UP and Punjab that may also cause lots of volatility in the market,” added Sunil Nyati.  
 
Manoj Dalmia, Founder and Director, Proficient equities Private limited, said there are several themes and events that could do well in 2022. Among the sectors, PSU and private banks can do exceedingly well due to lower interest rates, while EV technology and auto ancillary themed stocks may also hog limelight amid push by the government to promote EV mobility. 

“Real estate, home decor and building materials sector can be a proxy, while futuristic companies and IT companies can be good bets too despite stretched valuations,” Dalmia said.

Any change in Reserve Bank of India (RBI) policy from current easy money policy, which is expected to get dearer though the accommodative policy will be maintained, will be key event to watch out in 2022, says Vinod Nair, Head of Research at Geojit Financial Services.

The 2022 Union Budget will be very crucial as the economy is still under effects of pandemic and needs continued fiscal expenditure and reforms, he said. “Key state elections and lastly the flow trend of FIIs & retail during this elevated market will define the market in the short to medium-term,” said Nair.

Gaurav Garg, Head of Research at CapitalVia Global Research feels Budget 2022 will be an important event to look out for as FM might announce some major disinvestments in PSEs and might also surprise the street through various PLI schemes for sectors. “UP election will be another event, where street will keep a close eye as it would directly or indirectly affect market sentiments,” he said.

Omicron and inflation according to Ravi Singh, head of Research and vice president, share India, will be important factors to watch out for in 2022

“The vaccination drive has induced the hope of economic recovery after the reopening, but the new variant Omicron is again sending anxiety ripples among the investors. The development w.r.t Omicron would be one of most important themes to watch out in 2022,” said Ravi Singh.

He said the one thing that supported the stock markets worldwide post covid pandemic was the loosening fiscal and monetary policies by the central banks to support the economic outputs and easing of the bottlenecks. 

“However, the way inflation has been increasing due to higher commodity prices and crude oil, the central banks would be forced to tighten the monetary policy, thus raising the borrowing costs and draining the market liquidity. For the economies which are still in their recovery mode, the tightening may be among the biggest downside risk next year,” he said.