Jyoti Rai of Angel One had a long conversation with Moneycontrol on the future direction of the market and the expectations related to the upcoming budget. In this conversation, he said that until the corona wave caused by the Omicron variant will not reach its peak. Till then FII selling will continue. With the wave coming down due to the Omicron variant of Corona, FII outflows will see a decline.
He further said in this conversation that although this wave of Corona will lighten as well as FII outflows will also be light, but we do not expect foreign investors to invest very strongly in the Indian market in 2022. The reason for this is that due to aggressive tapering by the US Fed next year, global liquidity will be seen to decrease. Due to which the flow of FII money in emerging markets will be slow.
Talking about the upcoming budget, he said that some populist steps can be taken in the budget 2022 as elections are near in 5 states but in view of the financial compulsions, it is not expected that the government will take any such big step. .
Talking on the market, he said that in 2022, banking and NBFCs will be seen doing very well and will be among the top themes of investors. However, with the fall in the overall market, some correction can be seen in them in the short term.
Talking about where the market will be eyeing next year, Jyoti Rai said that now the market will be watching the wave of Omicron and its impact on global growth. Apart from this, the Union Budget of 2022-23 coming on 1st February will be a big event. After the budget, the eyes of the market will be on the state elections. UP and Punjab elections will be very important. Apart from this, the extent to which the conditions in the supply chain normalize will also be the focus of investors in 2022. If the supply constraints end soon, the prices of goods and commodities will fall, which will ultimately ease inflationary pressures. Lower inflation will reduce the aggressiveness of the US Fed’s stance, so that interest rates will not increase too much.
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Some such indications were also received in the last Fed meeting held in December 2021. If this happens, it will be a good thing for the Indian equity market. On the other hand, if the supply-related problems persist even in 2022, then eventually inflation will be seen rising. Due to which the monetary policy of the US Fed will be seen tightening. Which will not be good for equity market like India.
Talking on the Union Budget, he said that the government has been taking various steps outside the budget to give relief to the economy and promote growth. This includes provisions like the PLI scheme brought for all sectors and an additional expenditure of Rs 3 lakh crore for 2022. We believe that the government will stick to the policy of increasing expenditure to push growth while maintaining fiscal discipline.
Talking on the market, he further said that from a long term perspective, the worst phase has passed for the banking sector. Asset quality of banks is improving. However, the third wave of COVID-19 may put some pressure on the asset quality of banks. Keeping this in mind, investors can use this near term volatility as an opportunity to increase their exposure to the BSFI sector. Apart from this, we also believe in the digital theme. Looking at the increasing demand for digital technology, it seems that the growth of IT services companies will continue for the next 2-3 years.
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