With uncertainties facing India's equity markets next year, top analysts have termed sectors such as FMCG, pharma and IT services, along with real estate, power, infra, and telecom as 'safe and satisfying investment options in 2022.
Factors such as growth potential, price as well as evolving economic recovery have made these sectors more attractive than others.
"Given the uncertainties, one can focus more on defensives (FMCG, pharma, IT services) till there is more clarity on economic growth and inflation across the globe. This is despite the fact that defensives may not be cheap," said Deepak Jasani, Head of Retail Research, HDFC Securities.
"In case the markets continue to underperform, these sectors may provide downside protection as they may fall less than the market or other sectors," he said.
According to Vinod Nair, Head of Research at Geojit Financial Services, strong outlook sectors like pharma have undergone decent consolidation.
"Similarly, FMCG and telecom look good. Long-term outlook of IT is robust and has undergone a phase of time correction. New growth and theme sectors like renewables, electronics, textiles, and chemicals look good on a long-term basis, which are settling from high valuations," Nair said
Besides, other sectors such as real estate, power, infra, capital goods and banking will be eyed keenly by the investors.
"If I talk about the real estate sector, there is a turnaround story after 10 years of underperformance where the last five years were very painful due to demonetisation, NBFC crisis, RERA etc., but things are looking very bright now thanks to low-interest rates, stamp duty cuts, supportive government policies and consolidation in the industry due to RERA," said Sunil Nyati, Managing Director at Swastika Investmart.
"Similarly, power, infra and capital goods are coming out of 14 years of 'Vanvas', and the market has started celebration for this, which is likely to continue for the next couple of years because there is valuation comfort as well as strong growth outlook," Nyati added.
On the other hand, financials, auto, metals and aviation stocks might lose favour in the coming year.
"Markets around the world are already trading at all-time high, and most of the economies are trying to reach the pre-Covid levels. So, one can avoid auto sectors, as all over the world, the auto industry is struggling with chip shortage and supply may not meet the demand till the second half of 2022 or first half of 2023," said Gaurav Garg, Head of Research, CapitalVia Global Research.
"Second is the aviation sector, which is still struggling to make a comeback, especially with many countries still imposing bans on other countries, which may be witnessed until there is a clarity on the new mutation," Garg added.
Jasani pointed out that over-owned sectors like financials, auto, metals, among others, may keep underperforming for some time even as investors re-weight their portfolios in favour of emerging or safer stocks.