Year-ender 2021: Nifty500 companies report decent earnings in 2021; what is in store in 2022 – analyst give outlook

Listed companies are likely to maintain their growth trajectory, especially top line, albeit under some pressure on the operating margins front, several analysts opine as they draw their estimates on the quarterly earnings in CY 2022.

Almost all the quarterly earnings in 2021 for the Nifty500 companies, had been better than expected, except the first quarter of the current fiscal mainly due to the lockdown imposed due to second wave between April and June of 2021. While the normalisation in the earnings was visible in the second quarter of the fiscal 2021-22.

Mohit Ralhan, Managing Partner & Chief Investment Officer of TIW Private Equity points out that the earnings growth will probably be a tad lower than the top line growth, though the overall earnings growth is expected to be positive in 2022.

The operating margins would see pressure during the quarterly results amid the battle between inflation and tightening of monetary policy, he explained. 

The tightening of monetary policy is expected, going forward, this analyst states, adding that allocation to export oriented sectors such as technology and pharmaceuticals is expected to increase. 

Moreover, the inflationary environment is likely to result in a better performance by real estate and associated sectors. Ralhan remains quite positive on the consumer sector which has witnessed an irreversible demand of better-quality products by Indian consumers.

Ralhan mentions, the sectors and companies which import inputs or raw materials and sell their end products in the domestic market, may see more pressure on margins.

The year 2022 will continue to test the pricing power of companies and will require nimble footedness to react to evolving scenarios of inflation, wage hikes and impact of monetary policies, he added.

On a positive side, the companies, which have built strategic focus on productivity improvements, are likely to be able to defend margins, even if there is margin pressure at the sector or overall economy level Ralhan said.

“Banking, utilities, commodities, real estate and associated sectors are expected to do better in 2022," said Ralhan.

Similarly, TradeSwift’s Director Sandeep Jain also expresses the concerns related to margins across sector. The normalisation of earnings may take time but companies are likely to continue their economic growth trajectory, he said. He, however, puts supply chain issues as a prime concern.

According to him, auto sector will take some time to recover and the impact is expected to reflect in the quarterly results of 2022, given the semi-conductor issue is yet to be diffused completely.  The waiting period of Passenger Vehicles is still high, he said.

Jain expects technology and banking stocks to keep the market on the upside, leading the overall growth in new year.

 “Corporate profitability is critical for markets. We continue to have a view of marginal under-weight on small and mid-caps because of their valuation and marginal over-weight on large caps. It's time to be neutral to equity as an asset, as it is fairly priced,” Kotak Mahindra AMC's Group President Nilesh Shah said.