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Below is the Equity Outlook for 2022 By Mr. Rahul Shah, Co-Head- Research, Equitymaster.

You see, the stock markets have usually corrected by 20% or more after going up more than 100%-120% in a bull market.

 In this bull market so far, the Sensex has gone up by 140% from its lows in March 2020 to its all-time high in October 2021.

 Thus, there is a strong possibility we may witness a correction of 20% or more in the coming year.  In fact, we are already down 7% from the October highs and we may go down further.

 Valuations wise also, the markets are expensive what with the Sensex currently trading at a PE multiple of more than 27x versus its long-term average of around 21x.

 Thus, if earnings growth does not come in as strong as expected, markets may perhaps disappoint in 2022.

 Hence, it may not be a bad idea to book profits in stocks that have gone up a lot over the last 1-2 years and take some money off the table.

 Make no mistake, the long-term India story does remain intact.

 But it is always a good idea to take advantage of these small bull and bear markets within the larger, longer-term bull market and give your portfolio that extra edge.

 On the stocks front, prefer stocks with strong balance sheets and reasonable valuations and maintain a safe distance from highly speculative counters where the track record is hardly inspiring”.

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