“Our inclination is towards sectors that will participate in economic growth like BFSI, consumer discretionary – including auto, capital goods – infrastructure and IT,” says Vikaas M Sachdeva


The market has seen a lot of volatility of late but has ended the year with sizeable gains. What are the biggest risks for the Indian equity market in 2022 and what are the key triggers to watch out for?

Over the last few quarters, the Indian ecosystem has been creating enough tailwinds for businesses to stabilize and succeed. Some businesses have already started showing resilience which has led to the indices maintaining an upward trajectory, despite volatility.

We believe the Indian economy is yet at the cusp of take-off, after going through COVID-19 related grind over last 18 months. Lower tax rates, low cost debt and government’s willingness to spend have created great ground for that take off. Quality as a factor will make a strong comeback, having been overshadowed by value and momentum over the last few quarters.

Having said that, some of the risks that investor should keep in mind are

  • Inflation : Like vitamins in the human body, moderate inflation is always good for the manufacturing sector because it reduces real interest rates paid by them. However, pretty much like vitamins, lack of it or too much it is equally bad which is why inflation has to come down to more manageable levels


  • Employment : Despite bounce back in activities in labour focused industries like infrastructure and real estate, we haven’t seen meaningful gains happening on employment front. A lopsided development which doesn’t include the bottom of the pyramid is not sustainable, and over a period of time can become a politically volatile social issue. Hence, gains on the employment front are very vital.


What is your take on current valuations?

We would like to believe that the current opportunities businesses are looking at capitalizing on, are emanating from a once in a generation kind of economic environment. After a long time, there is visibility emerging on private sector capex, which in turn should have a ripple effect. Certain sections of the market have already priced in the earnings of certain businesses, particularly the new age ones, which could see some moderation. On the other hand, there is still scepticism on certain old age businesses whether they would be able to take the leap forward, which could be unwarranted

We believe that investors should invest or stay invested in the markets currently. Any dip should be bought into from a 3-5 year perspective as corporate earnings are looking to catalyse significantly going forward. No valuation metric can ignore growth over the long term


What are your views on mid and small cap stocks at this juncture?

We are quite upbeat about the economic growth of India over next 3-5 years and hence quite optimistic on earnings growth. A strong growth in economy can disproportionately benefit midcap and small cap companies. We currently have an AIF NFO open exclusively focusing on these opportunities, with 75% plus of the portfolio already invested in a high conviction, high performance portfolio


What are the global cues to watch out for in 2022 (Fed, China, oil prices, etc)?

While federal reserve actions, oil prices, Chinese economic slow down are things which should always be on the radar, some political developments which merit attention are the Russia-Ukraine-NATO engagement, the overhang of Chinese build-up in the north east as well as state elections in India.


Which sectors are you betting on in the coming months; which ones are expected to remain laggards? Why?

Since we are quite enthused by structural developments in the economy like, lower cost of doing business (taxes and debt), government capex, deleveraged balance sheet, our natural inclination is towards sectors which will participate in this economic growth like BFSI, consumer discretionary including auto, capital goods, infrastructure and IT.


What is your take on banking and NBFC stocks? Is the sector out of the woods yet or could there be negative surprises in store?

BFSI should continue to do well, however, we believe that investors should invest only in companies that have a moat and a proven track record.

The moat can arise from a company’s ability to raise cheapest money and ability to acquire customers to cross sell. We would shy away from companies where the management doesn’t have a proven track record. We have seen that the sector has been pro-active in doing provision to safeguard itself against shocks, if any, that could have come from COVID. They have raised money through QIP and done significant provisions in anticipation of shock – which probably may not arise.


In terms of economic and other policies that govern the Indian capital/financial markets, is there anything that you would like the Budget to address?

One of the long standing triggers for growth are mandatory investments in the likes of Se 54EA/ EB. Including asset management products like PMS and AIF in this list will give a further fillip to long term equity investing as a counter balance to short term retail trades which have started to dominate the landscape