The rally has been driven by strong liquidity, healthy corporate earnings and upbeat commentaries, falling Covid-19 cases leading to opening up of economies.
The broader markets have also staged a smart comeback with Nifty Midcap 100/Nifty Smallcap 100 gaining 46 percent/52 percent, respectively, in CY21.
The IMF has projected India’s GDP to grow at 9.5 percent in 2021 followed by 8.5 percent growth in 2022 – this would be the fastest growth among developed and emerging markets.
Given this high growth and large domestic demand driven economy, there is a strong interest among global investors to participate in the country’s long-term growth prospects.
Currently, the valuations are at elevated levels, which along with growing global concerns would keep markets in a consolidation mode.
Given the sharp run-up and premium valuations along with multiple global concerns, we would suggest investors to remain cautious.
Banking and Auto are 2 such sectors that have underperformed the market so far – but have the potential to turn out the dark horse in the rest of FY22.
One should keep on reviewing his portfolio from time to time and churn it from overheated stocks to more comfortable names as per his investment style.