Multi Asset Strategy - Buy-On-Dips Strategy To Build Equity Position If Under-Allocated: Axis Securities

Axis Securities Report

While the leadership in the asset classes keeps on changing in different market cycles, equities have been the best performing asset class in2021. Nifty was up 24%, midcap by 46%, and smallcap by 59% while gold prices contracted by 4% in 2021.

2022, however, has been a transition year, exhibiting liquidity reversal, policy tightening, geopolitical concerns, and a rising inflationary scenario, which led to higher commodity prices for the first half of the year.

On the encouraging side, the second half of 2022 is likely to see a moderation in commodity prices and some cool-off in inflation expectations as well.

The volatility, however, is likely to continue for some more time before it concludes in a more concrete direction. The direction of the bond yields, oil prices, dollar index, interest rate hike by the U.S. FED, and the intensity of inflation will further drive the market fundamentals for the second half of 2022.

Keeping these developments in view, the equity market returns are likely to be range bound and bottom-up stock ideas and domestic-oriented themes are likely to gain traction in the upcoming months.

With the recent correction, market valuation looks attractive vis-a-vis its levels eight months back and one should start accumulating high-quality stocks where the earnings visibility is reasonably high.

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