2021 Value Stocks

Market participants are focusing on 2021 and there is a huge level of enthusiasm and high expectation on the part of investors as far as the forthcoming year goes after an unbelievable 2020. It was not easy to pick pharmaceutical and IT as probable winners at the start of 2020 and similarly it will not be easy to pick the set of stocks that may dominate in 2021. Geyatee Deshpande puts forth a case for value stocks to do well in 2021 while Yogesh Supekar highlights how to identify value stocks

- Yogesh Supekar

An unbelievable 2020 is coming to an end and investors have already started focusing on what may lie ahead in 2021. The problem of entering a new year after a stellar market performance is always the high level of optimism and a hint of overconfidence in the ability of the markets to deliver positive returns. By all means, the market structure is simply looking great and there are no major signals of a reversal in trend. However, investors are increasingly realizing that the stock prices cannot jump in a unidirectional manner. The year 2021 may welcome us with additional volatility which may surprise investors.

Beginning of any fresh year there is always an attempt made by market participants to speculate which sectors will outperform and where the Sensex is headed towards. As of now, investors want to know:

• Whether the outperformers of 2020 will continue to outperform in 2021?

• Will the Sensex deliver double-digit returns in 2021?

• Will small-caps and mid-caps rally in 2021?

• Whether value stocks will outperform growth stocks in terms of value investing versus growth investing?

While the questions are pretty objective in nature, the answers to these questions are definitely not straightforward and subjective in nature.

Will Outperformers of 2020 do Good in 2021?

It is expected that the IT and pharmaceutical companies will continue to do well in 2021. There is earnings visibility in both sectors and there is a good amount of traction in stocks from both sectors as we enter 2021. Investors however have to be cautious on the valuation front. The outperformers of 2020 are expected to do well but it will be difficult for the stocks from these two dominant sectors to outperform in 2021.