7 All-Weather Equity Portfolio For 2022

Year 2022: Moderate your return expectation
7 All-Weather Equity Portfolio For 2022
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Those of us who have spent more than 10 years in the equity market may see the stock market returns in 2021 in resemblance of what we saw in year 2010. It was also the second year of emerging from a deep stock market correction in year 2008. Year 2009 was great year of equity return and even 2010 till October equity market gave phenomenal return. Even in current phase, equity market recovered from the deep correction of first quarter of 2020 generated good returns in 2020 and exceptional return in year 2021. While past performance does not necessarily predict future results, being an active equity investor does require understanding historical moves.

Now in 2022, amid hope that the current variant of coronavirus will soon become endemic from pandemic as vaccines are used widely baring few exceptions, investors may find it tougher to generate the kind of stock market returns that they saw last year.

A sense of return can be gauged from the performance of listed company. Among 3000 odd actively traded stocks on BSE, in year 2021 we saw more than 50 stocks going up by 10 times, or 1000 per cent. The best performing stock for 2021 was Flomic Global Logistics, which moved up from Rs 1.95 at the start of the year to Rs 188.15 at the end of the year, moving up by almost 10 times. So a one lakh investment at the start of the year would have turned whopping one crore by the end of the year.

Following Table Shows Top 10 Performing Stocks of 2021

CMP (01/01/2021) CMP (31/12/2021) Change in price
Flomic Global Logistics Ltd. 1.95 188.15 9549%
Digjam Ltd. 4.3 247.45 5655%
Adinath Textiles Ltd. 1.71 84.5 4842%
Raghuvir Synthetics Ltd. 20.41 756.6 3607%
Radhe Developers (India) Ltd. 9.35 324.55 3371%
Polo Queen Industrial & Fintech Ltd. 1.28 38.95 2943%
Xpro India Ltd. 34.5 939.05 2622%
Algoquant Fintech Ltd. 20.41 538.55 2539%
Tata Teleservices (Maharashtra) Ltd. 7.91 206.95 2516%
Rohit Ferro-Tech Ltd. 1.55 39.95 2477%

In terms of sector, though IT remained in the limelight, what steals the show was Textile Company that on an average generated return of 253 per cent. IT came in at third place.

Top Three Sectors in terms of performance (2021)

Sector Average Return Number of Companies
Textile 253% 210
Diamond &  Jewellery 230% 20
IT 229% 153

The worst performing sector was Bank. In year 2021 banks including private and public gave an average return of 15 per cent. Private sector banks lagged their public sector counterpart in terms of performance. SBI generated much superior return than the HDFC Bank.

Worst Three Sectors in terms of performance

Sector Average Return Number of Companies
Healthcare 60% 165
Paper 56% 34
Bank 15% 34

When it comes to corporate houses, Birla BK group that have companies like Algoquant Fintech, Century Textiles & Industries among others generated best returns in 2021. Tata group of companies came in second.

Top 3 Performing House (2021)

Average of Change in price Number of Companies
Birla BK 423% 7
Tata 267% 27
Jindal BC 250% 8

What is stored in 2022

On the surface, following the strong returns of 2021, stocks may appear expensive, deterring investors. In 2021, equity markets attained new all-time highs driven by strong corporate earnings growth even in the face of Covid-related restrictions, supply chain disruptions and rising oil prices. Headline valuations ended at a more than one standard deviation to long-term averages. The Nifty 50’s current price-to-earnings ratio (its market value per share divided by its earnings per share) is high relative to its historical value.

Nonetheless, we believe, global equity markets likely to continue climbing a wall of worries on number of fronts – growth peaking out, high inflation, accelerated tapering and rate hikes, slowdown in China, new Covid variants, high valuations among others, which may lead to high volatility.

India, on the other hand, has come out of the second covid wave and is catching up with the rest of the world. Economy is recovering quickly as evidenced by strong macro data – better-than-expected GDP growth, PMI consistently in expansion zone, improved core sector growth, GST collections above Rs 1 lakh crore for sixth consecutive month, narrowing of fiscal deficit and falling unemployment rate. Economic recovery has just started, inflation is under control, interest rates are likely to be in a moderate range, and corporate-profits-to-GDP is at all-time low and should move higher. Given depressed earnings and high liquidity, valuation multiples for Indian equities are elevated.

Nevertheless, 2022 can be a year of normalisation and transition as excess liquidity gets withdrawn and interest rates inch up. Hence, valuation multiples can be expected to normalize. Given the rally in markets in 2021, easy money has already been made. We, however, see another year of positive equity returns.  The powerful restart of economic activity will be delayed due to new virus strains. Central banks will start to raise rates but remain more tolerant of inflation. Inflation may be settling above pre-Covid trends, and we are going to be living with inflation. In the short term, market action may be more stock-specific and returns may be modest.

In the following pages we have designed ‘7 All-Weather Equity Portfolio For 2022’; welcome the New Year by adding these stocks in your existing portfolio. If you are reading on the app, please click here 

About the author: IE&M Team
IE&M Team
Indian Economy & Market is an Indian media and information platform producing data-backed news and analysis on all the vital elements at the intersection of the economy, stock markets, mutual fund, insurance, commodities, currency, technology, startups and business.

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