Equity has been the best performer among asset classes and will continue to do well in 2022 as there is no alternative for better returns, said ICICI Direct Research in a note.
Bond markets have enjoyed an almost uninterrupted bull run for more than a decade since 2008 as low-interest rates amid monetary stimulus were major tools for central banks, while commodities have failed to generate higher returns despite the sharp rebound. Meanwhile, equities continued to be the best performer among asset classes, the brokerage house explained.
“Both India and the US provided above 250 percent returns in the last 10 years. We believe lack of alternatives for returns would continue to favour equities and they will remain in focus in coming years,” said ICICI Direct Research.
So far in 2021, Nifty50 has gained 23 percent and Sensex was up 21 percent.
Further, Foreign Institutional Investors (FIIs) have usually been a major force behind the sharp moves in the market. However, in the last one and a half months, the Nifty has witnessed a correction of almost 11 percent whereas FII outflows have almost touched around Rs 80,000 crore, which is one of the highest ever in history in such a short span of time, the brokerage house pointed out.
Similar outflows were seen in February-March 2020 during the COVID outbreak, causing an almost 40 percent correction in the Nifty. Currently, with similar outflows, markets have absorbed the selling pressure and saw declines of just over 11 percent. This resilience can be attributed to significantly increased participation of Domestic Institutional Investors (DIIs) and retail participants, ICICI Direct Research explained.
“Fund flows from domestic investors have witnessed a sharp rise compared to FIIs. Direct retail as well as mutual funds have shown significant growth. Total market share of domestic investors (DII+HNI+Retail) has moved to 59 percent from 55 percent since 2015,” the note said.
ICICI Direct Research has identified a few stock investment ideas. Here are the brokerage firm's stock picks for 2022:
Mindtree is one of the few stocks in the midcap technology space which is trading near its lifetime high levels. Considering the sharp up move seen in the last couple of years, a round of consolidation cannot be ruled out. Moreover, since the stock is likely to be part of NSE100 indices in the next rebalancing, additional buying of Mindtree's shares by funds is expected in the coming weeks. (Buy Mindtree shares in the range of Rs 4,500-4,620 with a target of Rs 5,810 and a stop loss at Rs 3,925)
Reliance Industries: Given the weakness in the market lately, the stock has moved closer to its crucial support levels once again, which provides a fresh entry opportunity from a medium-term perspective. (Buy RIL shares in the range of Rs 2,300-2,360 with a target of Rs 2,960 and a stop loss at Rs 1,990) PVR: PVR's stock has exhibited a significant underperformance in the last many quarters due to the Covid-19 impact. Currently, the stock is trading near its long-term mean levels of Rs 1,350. As volatility has also contracted in the stock compared to last year, there is a high chance of fresh momentum coming back in the stock. (Buy PVR shares in the range of Rs 1,290-1,330 with a target of Rs 1,680 and a stop loss at Rs 1,120) State Bank of India: PSU banks found a new lease of life last year while sectoral leader SBI made fresh lifetime highs after a consolidation of more than a decade. The stock is in a major uptrend and any decline remains a buying opportunity. (Buy SBI shares in the range of Rs 445-460 with a target of Rs 580 and a stop loss at Rs 384)
Apollo Hospitals: The stock has seen a sharp move in the last couple of months as expectations are building up for its inclusion in the Nifty. With liquidity flows likely to remain higher, stocks could perform better. (Buy Apollo Hospitals shares in the range of Rs 4,700-4,820 with a target of Rs 6,045 and a stop loss of Rs 4,095) 
