Indian equities are the most expensive in the Asia Pacific region and most of the positives related to expected recovery in the economy is already priced in, says Credit Suisse.
The global financial major further expects that returns from equity will be quite moderate in 2022 when compared to the current calendar year. It expects equities in the Asia Pacific region, including India, to give single digit return in the coming calendar year.
This assumes significance as the current calendar year has been one of the best in recent years with the benchmark S&P BSE Sensex up over 20 per cent till date in 2021. Further, the record high touched in October – 62,245.43 – pegged the then returns at over 30 per cent in 2021.
Meanwhile, according to Credit Suisse, India seems to be recovering faster-than-expected from the pandemic on the back of supportive monetary policy and earnings recovery. It, however, adds that the recent rally suggests that most of the positives are already priced in.
“The Indian economy appears to be recovering quickly with faster-than-expected relaxations as the COVID-19 contagion ebbs. Conducive monetary policy has accelerated the economic and earnings recovery,” stated a release by Credit Suisse.
“However, following a 31 per cent rally year-to-date, India is the most expensive market in the region which suggests a large part of the recovery is already priced in. As such, we expect Indian equities to perform in line with Asian equities in 2022,” it added.
The global financial services firm forecasts equities to provide single digit returns in 2022 – much more moderate than in 2021 – though it expects stocks to continue to offer an attractive risk premium over bonds.
“Equity segments that lagged the pandemic recovery should emerge as bright spots, as should industries that benefit from secular growth trends,” it said.
Meanwhile, according to the Credit Suisse Investment Outlook 2022, the global economy is expected to grow by 4.3 per cent.
“Although several central banks have started to withdraw pandemic stimulus, interest rates are set to remain at or near zero in the major developed economies. Against this backdrop, equity returns should remain attractive, though they are likely to be more moderate than last year,” stated the report.
Interestingly, Credit Suisse expects Chinese equities to face headwinds amid “regulatory uncertainty and property sector jitters” and recommends “focusing on sectors and themes that are aligned with the government’s objectives.”