FY22 is going to remain reasonably volatile with the first half doing well in terms of earnings and the second half being too far away to predict right now, says independent analyst Anand Tandon. There have been some localised lockdowns following a spike in Covid cases in cities like Mumbai. That said, is it inflation fear which continues to bar the move in global markets? While there may be some concerns because of Covid, I do not expect any state to impose another lockdown especially since on the next few weeks, a set of new vaccines are coming in and that will mean the government would be in a position to open up the entire vaccination process for everybody and not just certain categories of people. It would be a matter of a couple of weeks more. The longer term fear has to be that inflation is going to be higher than what is forecast and the Indian inflation has already been higher than what was forecast. That will mean an upward move in the interest rates and consequently interest rate sensitive stocks will have an adverse effect. Some analysts are saying that continued earnings recovery is going to be very crucial for the market, sectors, as well as stocks. What are you expecting?It really is a question of what is your starting base. This year, the earnings estimates have actually come up from somewhat negative to somewhat positive and we are expecting to end the year with a number higher than what it was in the previous year which itself is not a trivial achievement given the fact that a couple of months were lost in the early part of the year to the lockdowns. Now the question is whether the 30-35% growth that most analysts are forecasting for FY22 is achievable? My argument is that it pretty much depends on what your view is on inflation because for a lot of people, the assumptions are that the margins that are being shown right now will be maintained and at the same time inflation will be somewhat benign. I find that a little confusing because the two cannot go together. You cannot have an issue where you have prices being passed on to maintain the margins because we are going to get to a stage in the next quarter itself where the inflation will increase, raw material prices and in many cases, the margins are probably the highest that you will get in the last quarter and this quarter at best. Going forward I would expect that to start correcting. The banking sector may actually benefit because their NPAs are probably a lot lesser and there can be a credit growth all over again because of recapitalisation and so on. There is a possibility that at least this sector will show a fairly significant growth. So do I expect 35% growth for the next year? I would expect but at the same time not expect. A 20% growth would be too pessimistic at this stage and may not justify the valuations that we are seeing in the market. It depends on global macros much more than what is happening in India. After the first half of the year, you will have to look at where the interest rates are headed more closely and valuations can be less supported by potentially higher interest rates. Net-net, the whole year is going to remain reasonably volatile with the first half doing probably well in terms of earnings and the second half being too far away to predict right now, but with a possibility of a downside from the current expectations. Do you believe that metals is a good investment option for the longer term or at least the foreseeable future?I would argue that metals had a good part of the rally already priced in. Another leg up is possible but it is finally cyclical and therefore you have to get out of it at an appropriate time. I am not suggesting that the time has been reached but again my overall thesis remains that we are probably in an inflationary environment much more than the market thinks and that will reflect itself in almost all commodities. I am reasonably bullish on most commodities, especially those that have not gone up so much. Those that have gone up can have a pause and therefore move up again but there is nothing long term about metals per se. At the end of the day, it is cyclical and the moment we start talking about the long term, we will miss the price appreciation and it will be tie for you to exit. For this year, the numbers for most of the metal companies will be extremely good. For the next financial year, I would expect the first half to be reasonably good and thereafter we will have to see how the rest of the economy picks up. But within that, non-ferrous will do better than ferrous even though the sector is smaller in India.