The year 2020 was an extraordinary period for the equity markets. The Covid pandemic was a black swan event that caused the biggest drop in domestic GDP and the meltdown in equity markets was one of the fastest on record. Yet, if the market downturn was unprecedented, so was the recovery that followed. Analysts believe that domestic and global economic recovery is poised to continue in the year 2021 and will gain strength once vaccines are deployed and the world starts to return to normal social work. Fiscal policy support and virus containment are two big factors which will greatly influence the recovery process around the world. Fund managers expect profit growth to accelerate in the next one year and improvement in fundamentals bodes well for the equity markets. Since earnings growth provides a significant tailwind for equity markets and that’s why historically, equity markets have generated a higher risk-adjusted returns during the early stages of a business cycle. Fund managers continue to seek opportunities in sectors that may benefit from longer-term disruption. Hence, information technology companies that are supported by strong fundamentals will stand to benefit the post in the post Covid era. Disruption and opportunities go hand-in-hand and it is intelligent to invest in robust companies with scalable technology systems that support long term business growth. Companies that have an economic moat report strong financial performance with rising return on capital and it is best to invest in them. The demographics will always support such strong market leaders. The Covid-19 pandemic has catapulted a majority of Indian businesses to shift online and hence the need for technology has become the path for sustained growth. Digital technology and digital payments will probably carry the next wave of economy recovery. SBI Cards and Payment Services Ltd came out with a public issue of equity shares in March 2020 during the pre Covid era at a price of Rs 750 per share. The share plunged to Rs 495 in April, but has recovered to Rs 950 levels at present. Analysts and mutual fund managers are extremely bullish on the scrip for the long term and investors looking at long term can accumulate the stock in their portfolio for superior gains.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.