Many of you would come across reports or social media posts on ‘Where to invest in 2022’. There is a lot of number crunching and analysis happening as you read this column. We continue to maintain that the column does not offer any investment advice. However, you can learn to read the signs, understand factors that influence your investment decisions.
The year ahead is set to deal with Omicron, the new Covid-19 variant described by the World Health Organisation as spreading more rapidly than we think. Inflation is anything but transitory and likely to be the key challenge in 2022.
If not for the Omicron variant, the inflation factor would have meant steady rising interest rates. Yes, they may increase in the United States, as the US Federal Reserve has already announced. Europe would follow too in putting an end to the easy money policy.
However, the economic activity is unlikely to get back to the same level as before the pandemic’s onset. That would mean economic growth would remain a challenge for most countries.
In India, the Reserve Bank of India is still supportive of growth. It is not so worried about rising wholesale and retail prices. In the review earlier this month, the RBI monetary policy committee continued with an ‘accommodative’ credit policy stance.
That means interest rates would stay low to support easy borrowing for business expansion and private consumption.
A valuable time was lost during the pandemic as the economy witnessed a near shutdown. India’s economy has to grow faster for years to recoup the losses incurred during the pandemic.
The small and medium businesses have been at the receiving end of the pandemic and would take a long time to get to a stage where they hire new people for expansion.
For any sustainable economic growth, small and medium-sized businesses have to not only get back on their feet but go into an expansion mode. While interest rates may hold firm, they may not rise significantly in India in 2022. It is unlikely that RBI’s monetary policy committee would make significant changes to borrowing rates.
That is the big picture.
From your standpoint, that means fixed deposits and other fixed-income instruments are likely to offer a similar return to that in 2021.However, there is a silver lining to all the gloom. The slump in domestic consumption is set to pick up in 2022.
That is because, in 2020 and 2021, most salaried households saved more and spent less. As people get back to work again, go out and commute to work, dine out and travel, the demand for goods and services increases. Those with jobs in sectors like IT services will likely witness more opportunities and salary revisions.
The recent announcement of quarterly results by Accenture, one of the biggest IT services employers globally, suggests a significant uptick in new hiring. Indian IT services companies are unlikely to be far behind as they compete with global companies like Accenture and Capgemini directly.
A survey of over 2,300 IT professionals by Spark Capital, a Mumbai-based brokerage, reveals that they are likely to spend more on electric cars, two-wheelers, consumer durables and other electronic gadgets.
They are likely to take a higher life and health insurance cover. They are likely to buy more personal goods online. There is also an excitement about equity and mutual fund buying. Almost all of them have signed up for learning a new professional skill.
All of that suggests increased demand for consumer technology led-services. It may be good to look for sectors with poor market penetration. While telecom and internet services are well-entrenched, financial services still have a long way to go.
Any business that enables equity trading, buying or selling insurance online, payment and banking services, digital loan companies, makes or sells electric car companies, or related services are areas to look at. The market is witnessing an initial public offering boom. A lot of these issues are overpriced. You have enough time in 2022 to assess their market performance.
You must bear in mind that equity investing is not about today. It is about tomorrow’s profits. You need to look at businesses that can survive your lifetime. That is an excellent way to look at investing in 2022.
(The author is editor-in-chief at www.moneyminute.in)