Ajay Bagga expects 4 sectors to outperform in 2022

"There is no reason for the market not to continue its upward journey. The big risks, of course, are inflation and central bank action," says market expert Ajay Bagga.

Can the party continue in 2022 or we should temper our expectations?
Little tempered expectations because against about 34% earnings growth in 2021, we are looking at about 16% earnings growth on the Nifty50 in 2022.


So the base impact will come in. I am cautious. There is no reason for the market not to continue its upward journey. The big risks, of course, are inflation and central bank action.

Central banks getting ahead of the economies and causing some kind of market correction is the biggest risk if you ask me. Geopolitical risks always are there be it Russia, Ukraine or China, Taiwan all those things are factored in. But for three years, the US markets have surprised the world with bumper returns and led the global markets forward.

We have had two good years and it looks like 2022 will get a lesser return than 2021, but it should continue to be positive and build for the future bull markets in this country.

The economy should be turning and we expect private capex to come in towards the middle of next year to see more private capex announcements. So it is looking more like a 2003 market, but domestic cyclical look to be the outperforming sectors starting with banks, industrials and auto, real estate.

These will be the favoured sectors, IT being the global play. With the present cash levels in the IT stocks, I'm expecting some more buybacks announcements. Also, continued order books for major players should help the sector as well.

What about banks? They have been underperformers. So are you talking of things picking up but without banks?
Certainly not. It will be with the banks only, and two years of underperformance, I think, will get taken in 2022. We have had quite a few idiosyncratic events with banks which have led to just when they would be ready for zooming up, we saw some correction coming in. More idiosyncratic rather than structural.

Structurally banks have taken out most of their NPA issues, corporate NPA issues are behind us, the fresh lending has been very careful and much conservative. On the retail side, secured lending in the home finance side should do well.

The banks are eating market share from the home finance and the NBFC companies, so expecting the banks to do well in 2022. We should see a catch-up trade something like what we saw in October of 2020 when banks had promised a lot, but unfortunately, that led to a correction eventually. So we have not gone anywhere on the Bank Nifty over the broader banks segment expect a lot more next year. So it would be our favoured sector.