Mark Matthews, an analyst at the firm, said India managed the Covid-19 situation better than others, and the worst of the country’s epidemic appears to be over, with some herd immunity probably having been achieved, and a vaccine drive being expanded.
“An economic recovery is underway, and we look for 9 per cent GDP growth this year, followed by 7 per cent next year. We look for earnings per share to grow on average over 25 per cent over the next three years. It would be unprecedented for the stock market to fall in an environment of such strong growth,” he said.
Julius Baer sees a 15 per cent upside from the current levels in the S&P BSE Sensex index, with a target of 58,450.
Matthews said an ideal mix of growth and cyclical stocks is recommended to play the strong expected earnings recovery in FY22. He recommended a barbell approach of owning stocks, which includes buying:
- Consistent growth-compounding sectors with structural stories, including IT, healthcare and FMCG, with a focus on the leading companies in them.
- Cyclical sectors like financials, infrastructure, housing and discretionary consumption, whose earnings are more correlated to the economic recovery.
Julius Baer sees tailwinds for healthcare, IT, private capex, housing, consumption and clean energy. From these sectors, it has a ‘buy’ rating on Infosys (Target: Rs 1,550), Axis Bank (Target: Rs 760) and ICICI Bank (Target: Rs 660).
Mathhews also advised investors to watch out for the possible risks, the biggest of which is mass selling by foreign institutional investors in case earning estimates are not met. In just the last five months, FIIs have poured in Rs 1.7 lakh crore into Indian equities.
“A resurgence in Covid cases and resulting lockdown restrictions, delays in the vaccination drive, a slower than expected recovery in private capex, an increase in NPA levels, or a sharp rise in inflation driven by crude, are other risks to keep an eye on,” he said.