Model Portfolio Update - January 2022 - ICICI Direct

CY21 has seen a strong economic recovery from the unlocked lows. The recovery in growth mainly stemmed from the government led initiatives by focusing on "Atmanirbhar" schemes panning across a gamut of sectors, which, in turn, will act as a multiplier catalyst across layers of GDP growth and get the economy back on fast track to achieve the $5 trillion aspiration
At the onset of CY22, a sea change is expected in the way business operates and transforms itself given the innovations in the Digital and Tech world. From a market perspective, sectors that we are bullish on are IT, capital goods, auto ancillaries (EV exposure), retail and real estate
Midcaps, small caps gave stellar returns in CY21. This is expected to continue in CY22E driven by inherent business moats as the earnings CAGR for midcap, small cap in FY21-23E is expected at ~39%, 28%, respectively. Going forward, innovative themes present in the midcap & small cap space (like speciality steel chemicals, home textiles, CRAMS, etc), superior earning potential and reasonable valuations (trades at <20x PE on FY23E, ~0.5x PEG) make us believe that more upsides are in store for investors
We also highlight the key risks for CY22 that may get manifested in the form of a) reversal in interest rate cycle globally amid inflationary pressures and b) geopolitical risks that may decide the direction of already spiking energy costs

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