This one sector can perform well in 2022

Despite marginal FIIs selling markets have gone up. What does this tell you?

It is mostly relief that Omicron will not be as bad as anticipated. But, I would be very cautious going into next week because on Wednesday, the Fed will put out its policy, especially the taper timeline.

What will be looked at is how many rate hikes do they anticipate in 2022. It might go up from two to three rate hikes next year. The probability for the first-rate hike in May is also very high. Anticipating very high volatility going into Wednesday and post the press conference, the markets will settle for the rest of the year. After that, only we can look at the January effect kicking in. So still caution, a lot of volatility ahead.

Is it time to go overweight on some capital goods companies?

Yes, that is the start of the private capex. We are expecting that to accelerate over the next six to 12 months. They will be beneficiaries. Valuations are pretty good, stocks have run-up in the last few days on the back of this, but these industrial, capital goods suppliers companies are in a good spot and are amongst the favoured sectors.

Within this sector do you like MNCs or traditional names like L&T? Defence could also come under this sector. So how would you look at this sector?
L&T is the leader of the pack. If you are counting on the Indian economy, you have to start with the banks and L&T. It has got multiple triggers going for it, so L&T is in a class of its own. And then I prefer the low debt, well-capitalised companies who will benefit from this and especially the MNCs have been underperforming for quite some time, but they have great management. I would put them ahead. Coming to the midcap segment, here again, look at the debt profile. We are expecting private capex to return as well as the industrial orders to come back fast. So all these companies will benefit as a sector, it would be amongst the top sectors for the next year.