New Year Picks – January 2021
New Year Special
A Promising start to a new year
India’s economic recovery from the Covid lows has been quicker than expected
and has come as a pleasant surprise for the markets. While India’s recovery from
the pandemic lows was slow to begin, we have witnessed a strong acceleration in
economic activities over the past few months due to reopening of the economy and
festive demand. News flow on the vaccine front continues to be positive as various
countries like the US and UK have started their vaccination program which gives us
hope that the Covid situation should improve significantly by the second half of
2021. Continued monetary and fiscal stimulus by central banks and Governments
has led to a global risk-on environment despite sharp increase in Covid-19 cases
globally. Given the positive sentiments we see continued momentum in cyclical
sectors like auto, banking and consumer durables. We also expect that sectors with
strong revenue visibility like chemicals, IT and pharmaceuticals will also continue
to do well.
India’s economic recovery has been quicker than expected
High frequency indicators like PMI numbers, power demand etc. continues to point
to a quicker than expected recovery in the economy. The manufacturing PMI for
November at 56.3 points to continued strong rebound in manufacturing. Though
this is lower than October’s print of 58.9, last three month’s PMI numbers point to
a strong acceleration in the manufacturing sector. Services PMI at 53.7 for the
month of November also points to a solid pace of expansion despite falling from
54.1 in October.
Government stimulus and RBI’s easy monetary policy to support recovery
The Government has announced various rounds of stimulus measures including
the most recent `2.65 lakh Cr. Atmanirbhar Bharat 3.0. The RBI in its latest MPC
meeting has guided that they will maintain their accommodative stance well into
FY2022 despite high inflation. The various fiscal and monetary measures
announced by the Government and the RBI will support the economic recovery.
Vaccination and US stimulus package leading to risk-on environment globally
After months of delay the US Government has successfully passed the second US
stimulus package of USD 900bn which is a positive development for the markets.
Moreover various countries like the US and UK have started their vaccination
program which gives us hope that the Covid situation should improve significantly
by the second half of 2021. Positive developments on the vaccine front along with
continued fiscal and monetary support from Governments and central banks is
leading to a risk on rally despite a surge in Covid-19 cases globally.
We expect the broad based rally to continue for now
The rally in the past few months has become broader with more sectors
participating in the rally. We expect the rally in cyclical sectors will continue for now
given the risk-on environment globally and expect sectors like auto, BFSI,
consumer durables and cement will continue to outperform. While we expect
cyclical sectors will continue to do well we also continue to remain positive on
chemicals, IT and Pharma given strong revenue visibility in these sectors.
Source: Company, Angel Research
Note: Closing price as on December 29, 2020