Indian equities are the most expensive in the Asia Pacific region, and most of the positives related to the expected recovery in the economy are already priced in, says Credit Suisse.
In 2022 returns from equity are expected to be quite moderate compared to the current calendar year, according to the global financial major. It expects to see a single digit return in the coming calendar year in the Asia Pacific region, including India.
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 in 2021. The record high touched in October 62,245. In 2021, 43 pegged returns at over 30 per cent.
India seems to be recovering faster than expected from the pandemic thanks to the support of monetary policy and earnings recovery, according to Credit Suisse. It adds that the recent rally shows that most of the positives are already priced in.
The Indian economy seems to be recovering quickly with faster than expected relaxations as the COVID 19 contagion ebbs. According to Credit Suisse, the economic and earnings recovery has been accelerated by the use of conducive monetary policy.
India is the most expensive market after a 31 per cent rally year-to-date, which suggests a large part of the recovery is already priced in. It said that Indian equities should perform well with Asian equities in the year 2022.
The global financial services firm predicts equities to provide single digit returns in 2022 will be more moderate than in 2021, but it expects that stocks will 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.
According to the Credit Suisse Investment Outlook 2022, the global economy is expected to grow by 4.3 per cent.
Interest rates in the major developed economies are close to zero despite the fact that many central banks have started to withdraw the pandemic stimulus. Equity returns should remain attractive despite the fact that they are likely to be more moderate than last year, according to the report.
Credit Suisse expects Chinese equities to face headwinds due to regulatory uncertainty and property sector jitters and recommends focusing on sectors and themes aligned with the government's objectives.