For stock market investors, what will be the big equity investment themes of year 2022?

As the economy recovers, many of the traditional themes like metals, capital goods and infrastructure plays are likely to become attractive. However, these will at best be the index performers. In terms of big sectoral themes, the focus would still be on two specific areas viz. digital and green energy. This will be the first full year when green energy as an investment theme will really start to make an impact on market returns.

Let me talk about the digital theme first. Digital IPOs began with Zomato in 2021 and for year 2022, that will still be the biggest theme (outside of LIC). The year 2021 saw just the 4 digital IPOs of Zomato, Nykaa, Policybazaar and Paytm raise a massive Rs.39,000 crore. What is more, their combined market cap is now around Rs.3.50 trillion and growing. Year 2022 will see the entry of the likes of PharmEasy, Snapdeal, Delhivery, Swiggy etc.

However, the metrics for evaluating digital plays will get more sophisticated in the year 2022. For example, the focus will be on how these digital stories minimize cash burn and trim down their cost structures. Investors will still be OK with profits getting delayed but they will expect clear trajectory on EBITDA growth and how the so-called intangible assets like brand, eyeballs and visibly will be sensibly monetized by these start-ups.

The emerging theme of 2022 will be the Embedded green theme. These are not the green start-ups, but the existing established companies exploring the value of their green initiatives in a systematic and consolidated manner. It could be the EV plans of Tata Motors, green hydrogen plans of Reliance or NTPC hiving off its renewable energy business into a separate entity. This will be the first step and simpler as these are established names.