Promising sectors for the long term
The domestic markets have been in a bull run since the last few years. The main drivers of this bull run include inflows from the foreign funds, consistent growth in the economy and positive sentiments of investors and traders here. There has been a lot of volatility in this bull run, especially in the last couple of years. We have seen many phases of short term rallies and consolidation in this long bull run. These shorter rallies were always dominated by some sector stocks or the other, based on market conditions and investor sentiments.
Historically, it has been proven that investments in equity give better results than any other investments over the long term. These are some of the sectors that are looking good for a long-term investment perspective. Investors can build their portfolios by picking good stocks from some of these sectors.
Infrastructure and real estate
Domestic consumption and investments in infrastructure are the prime drivers of growth for the domestic economy. That is why infrastructure is one of the most focused on sectors. There is a huge demand of infrastructure development in the hotel and hospitality industry, airports, housing, development of malls, special economic zones (SEZ) and rail/road infrastructure. Many new schemes are coming under the public-private partnership (PPP) scheme. The Government is also promoting the housing sector by providing tax sops to home loan borrowers. Investors can hold on their investments in real estate companies and can accumulate at dips.
Power and energy
The domestic economy is growing at around nine percent per annum. India's per capita consumption of energy is growing quite fast. Companies are going in for capacity addition to fulfill the growing demand of energy. As a result, we are seeing a lot of optimism in the power and energy sector stocks. Investors can hold on to their investments in power companies and can accumulate at dips. Sectors like power generation, power distribution, and oil and gas companies are quite attractive from a long term perspective.
Banking
Banking is another sector which is expected to be on the investors' radar in the long term. Private and foreign banks increased competition in the banking sector by introducing new services. The profitability of private sector banks is quite high due to the usage of technology and innovative ways to serve the customers better. Also, it is expected that a lot of value will get unlocked by integration of smaller PSU banks and there is a good opportunity to make good returns in the long term.
Retail
This sector is one of the hottest sectors in India. The share of the organised retail sector is less than five percent of the total retail market in India. However, the share of the organised retail sector is growing at a healthy pace year after year. Many big players have already jumped into the fray and many others are showing active interest in this sector.
FMCG
Traditionally, FMCG is considered a defensive sector. Growth in the economy has resulted in better earnings for the middle income segment which in turn translated to more consumption of FMCG goods. This sector started performing well from the latter part of 2005 and consolidated in 2006. FMCG companies could find new markets in rural areas as well. FMCG companies also hiked the prices of their products. The momentum in the retail sector is expected to increase their penetration levels. Investors can invest in FMCG stocks to diversify their long-term portfolio.
Telecom
India is one of the fastest-growing mobile markets in the world. Mobile companies are seeing their market growing month after month. Telecom penetration in India is less than 25 percent which is quite less in comparison to near 100 percent in developed economies. There is a huge potential for growth of telecom companies in India. Investors should hold on to their investments in telecom companies and can accumulate at dips.
These are the sectors that look attractive in the long term. However, it is advisable that investors in equities should keep a regular track of their investments and shuffle (book profit/loss once target is achieved, revise target etc) their portfolio from time to time. Tracking of news, results and price movements of your stocks is as important as investing in them. Investors who cannot afford to track their investments regularly will be better off investing in a mix of equity mutual funds.
Historically, it has been proven that investments in equity give better results than any other investments over the long term. These are some of the sectors that are looking good for a long-term investment perspective. Investors can build their portfolios by picking good stocks from some of these sectors.
Infrastructure and real estate
Domestic consumption and investments in infrastructure are the prime drivers of growth for the domestic economy. That is why infrastructure is one of the most focused on sectors. There is a huge demand of infrastructure development in the hotel and hospitality industry, airports, housing, development of malls, special economic zones (SEZ) and rail/road infrastructure. Many new schemes are coming under the public-private partnership (PPP) scheme. The Government is also promoting the housing sector by providing tax sops to home loan borrowers. Investors can hold on their investments in real estate companies and can accumulate at dips.
Power and energy
The domestic economy is growing at around nine percent per annum. India's per capita consumption of energy is growing quite fast. Companies are going in for capacity addition to fulfill the growing demand of energy. As a result, we are seeing a lot of optimism in the power and energy sector stocks. Investors can hold on to their investments in power companies and can accumulate at dips. Sectors like power generation, power distribution, and oil and gas companies are quite attractive from a long term perspective.
Banking
Banking is another sector which is expected to be on the investors' radar in the long term. Private and foreign banks increased competition in the banking sector by introducing new services. The profitability of private sector banks is quite high due to the usage of technology and innovative ways to serve the customers better. Also, it is expected that a lot of value will get unlocked by integration of smaller PSU banks and there is a good opportunity to make good returns in the long term.
Retail
This sector is one of the hottest sectors in India. The share of the organised retail sector is less than five percent of the total retail market in India. However, the share of the organised retail sector is growing at a healthy pace year after year. Many big players have already jumped into the fray and many others are showing active interest in this sector.
FMCG
Traditionally, FMCG is considered a defensive sector. Growth in the economy has resulted in better earnings for the middle income segment which in turn translated to more consumption of FMCG goods. This sector started performing well from the latter part of 2005 and consolidated in 2006. FMCG companies could find new markets in rural areas as well. FMCG companies also hiked the prices of their products. The momentum in the retail sector is expected to increase their penetration levels. Investors can invest in FMCG stocks to diversify their long-term portfolio.
Telecom
India is one of the fastest-growing mobile markets in the world. Mobile companies are seeing their market growing month after month. Telecom penetration in India is less than 25 percent which is quite less in comparison to near 100 percent in developed economies. There is a huge potential for growth of telecom companies in India. Investors should hold on to their investments in telecom companies and can accumulate at dips.
These are the sectors that look attractive in the long term. However, it is advisable that investors in equities should keep a regular track of their investments and shuffle (book profit/loss once target is achieved, revise target etc) their portfolio from time to time. Tracking of news, results and price movements of your stocks is as important as investing in them. Investors who cannot afford to track their investments regularly will be better off investing in a mix of equity mutual funds.