TIME FOR REBUILDING!

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 TIME FOR REBUILDING!


The year 2022 is setting in amid a new wave of coronavirus “Omicron” and  systematic withdrawal of easy liquidity in the system by several central banks all over the world. Though winds of change tend to create some ripples, they also promise to bring in the good times for the global economy and financial market.


Globally the US, the country that really matters, has ambitious capital expenditure plans. Over the next few years, the planned capital investment of around $2 trillion could lift growth rates in the global economy itself. The beginning of the Rebuild America will be having positive implications in the world economy.


Domestically, with the withdrawal of easy and cheap money globally, the fundamentals would likely come into play once again. One should consider rebuilding the portfolio with inclusion of  large caps and gradual exit from small & mid caps which already had a dream run in the past one year. India is on the cusp of a multi-year up cycle in economy with policy support by the union government such as production linked incentive schemes and more focus on infra spendings. Sectors like steel ,real estate, pharma & chemicals are in capex cycle and should perform well for the next 4-6 years horizon.


We need to evolve with the time and focus on sustainability, climate changes and  to rethink the portfolio building strategy. Stocks that score high on the ESG front are likely to grow well in the coming decade. Reliance is one of those stocks which is having a big focus on sustainable energy and this stock would likely see decent appreciation in valuations and could be first to achieve the mark of a trillion dollar company in years to come.


Corona is back with a new name Omicron and we  would likely see the repeat of the same old practices such as partial lock downs and restrictions to curtail the spread. Sectors like hotels and restaurants and to some extent retails would be affected most.  However, as we have seen in the past also, once the restrictions are eased the sectors start performing well again. In my opinion one should keep the strategy of buy on declines in these sectors. 


Lastly, banks are in much better health now and their balance sheets have enough capital to support meaningful growth in advances. The valuations of major private banks are at attractive levels so is the case of the elephant SBI. Those who have an aggressive tendency to invest directly in equities should allocate a good portion for the banking sectors and others may start investing more in banking funds.


HAPPY NEW YEAR AND HAPPY INVESTING!


-Rajendra Jhanwar     

     

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