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For investors, the last two years haven't been easy. Interest rate hikes, rising inflation, COVID-19 scare and now the Omicron variant, have caused stock market volatility. Will it continue in 2022? You ask. Well, we at Teji Mandi believe that India is coming out of a downcycle and entering into a structural upcycle as far as the economy and corporate earnings are concerned. Markets follow corporate earnings and the economy, so we are in for a structural bull run. With the economy set to grow over 9 per cent in FY22, we are quite positive about demand picking up. There is a lot of macro noise around, like Omicron and Fed, but markets should continue to do well. You should look at it as a buying opportunity. For instance, if something is worth Rs 100 and it becomes worth Rs 60 or Rs 70 because of a completely unrelated factor, or something that doesn't affect you on a day to day basis, then you should buy it. Having said that, it'll not be as easy as it was to make money in the last year and a half. Reason? Because the low hanging fruits, to some extent, have been priced in, and so going forward it will be like a very sector-specific or stocks specific opportunity that one would have to look at. This also means, going forward, you have to do more deep dive into the companies that you are investing in.

3 Sectors That Are Likely To Sweep the Market in 2022

From a buy point of view right now, we would look at banks, IT services companies, and also some companies in the infrastructure or capex sector.

Banks

Banks are the backbones of any economy, and without them, you can't have a market, and you can't have an economy. With India set to grow over 9 per cent in FY22, we are quite positive about the sector. This will help banks as it will boost demand for loans and the creditworthiness of borrowers. Hence, we believe banking stocks are better positioned. Banks and financials space has already witnessed a sharp decline in business activities because of lockdowns. But since July, thanks to the easing of lockdowns, record vaccination etc., things have started to rebound. Credit growth bottomed out at about 5% in April and has increased to about 7% in November. Furthermore, buoyancy in banks was reflected in the quarter gone by, with banks reporting the highest profit as well as improvement in asset quality. With the country vaccinating close to 140 crore population, potential third COVID-19 wave unlikely to be as bad as the second, and the high-frequency indicators hinting at strong growth, we should see higher credit uptake in the near future. Hence, we are quite positive about some of the large private sector banks.

IT Services

IT Services are in a demand supercycle. Demand for digital has grown and further accelerated by the pandemic. Companies are seeing a demand upcycle, like what was witnessed in the early 2000s. In H1FY22, many major and minor IT companies have reported strong deal wins. Once things are executed, you see further growth kicking in. Also, several companies are reporting positive commentary on IT spending, and we see greater visibility on tech spends leading to higher growth momentum.

Infrastructure and Capex

Infrastructure space is at an inflection point. The union and state governments are embarking on ambitious infra projects to stimulate growth. The pipeline is massive - 80,000 km of roads under Bharatmala, 1,000 km of metro in cities, 500GW of renewable energy by 2030 etc. The companies in this space are reporting strong order wins and we expect order momentum to accelerate going ahead. We believe that the infrastructure sector is at the cusp of a big upcycle as the fundamentals, execution and order win remain strong. Despite the hiccups in 2021, the stock market is in a recovery mode, and understanding these sectors will be critical for long-term investors. These sectors appear intriguing and have the potential to provide huge opportunities and returns.

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