SINGAPORE — Several sectors including financial services could do well in India this year if the country manages to avoid a second wave of coronavirus infections, according to one asset management firm.

“If you have to look at 2021, we think financial services, home improvement and cyclical sectors will benefit if there is no surprise on the Covid-19 side,” Nilesh Shah, managing director of Kotak Mahindra Asset Management, told CNBC’s “Street Signs Asia” on Thursday.

Cyclical stocks are those tied to the overall economy, and they do well when the economy is growing but falter when it contracts. Examples include cement, steel, construction as well as capital goods.

“On the other hand, if there is a second wave of infection just like in Europe, then probably defensives like IT, (fast-moving consumer goods), pharma will be supported,” he said, referring to shares that provide consistent returns no matter how the stock market is performing.

Indian markets have performed relatively well in recent months following a sharp sell-off in March. That’s despite the economy contracting for two consecutive quarters since April due to an extensive national lockdown aimed at slowing the spread of Covid-19.

India has the second-highest number of reported Covid-19 infections in the world. More than 10.39 million people have been infected, with over 150,300 reported deaths, according to Johns Hopkins University data. But government figures indicate that the number of active infection cases has been falling.

The Nifty 50 benchmark index, which represents the weighted average of 50 of the largest Indian companies, is up 86% from its March lows. The Sensex, which tracks 30 large, financially sound companies, is up 85% for the same period.

Asked if the Nifty 50 might break the 15,000 barrier, Shah said that even though the momentum right now is positive, a lot will depend on corporate earnings for the December quarter. It last closed on Thursday at 14,137.35.

“If they maintain same margin which were maintained in September quarterly, then I’m sure upward movement of market is possible,” he said.

Corporate earnings for the three months ending September performed better than expected, according to Kotak. The asset management firm predicted a strong earnings rebound for the 2022 and 2023 fiscal years — India’s fiscal year begins in April and ends in March the following year.

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