Banks, real estate sector to lead rally in FY22: Rusmik Oza of Kotak Securities

FY21 has turned out to be one of the most unpredictable year for everyone. Equity markets worldwide have seen a major rally. During FY21, Nifty-50 returns of 71% outperformed the MSCI World Index (up 51%) and MSCI Emerging Market Index (up 55%).

Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities expects market to remain range bound. Talking about the valuation and outlook, Oza said that in the immediate future Indian markets could go in for some correction and consolidation phase but as time goes by it could recoup and standout.

Going by the trend of first three months of this calendar year, Oza expects India to stand out in terms of FPI flows coming into emerging markets. We could see some rotation from economy driven sectors to defensives in the near future as investors would like to protect their gains. However, the defensives sectors like FMCG, Pharmaceuticals and IT Sector may just act as a protection or safety net as their valuations are already very rich.

As far as earnings is concerned, Kotak Securities’ revised earnings growth for FY21 & FY22 for Nifty 50 is 21% and 34% in FY21. From the brokerage’s coverage universe, Oza expects very high earnings growth in FY22 to come from following sectors: Auto & Auto Ancillaries, Banks, Capital Goods, Paints, Consumer Durables, NBFCs, Life Insurance, Real Estate, Retailing and logistics.

‘’We would suggest buying economy driven sectors in declines. Few sectors and pockets that can lead the rally in FY22 are banks, capital goods, construction, engineering, oil & gas, cement, real estate & metals. There could be selective stocks from FMCG and IT that could also do well in FY22’’, he added.

India’s stable currency and bond yields could help attract higher FPI flows in comparison to other emerging markets. Similar level of Sensex by end of FY22 could be ~52,300. If Nifty 50 goes below 14,000 levels then it will be ideal time to accumulate stocks from a 2 to 3-year perspective, he said.