Has the Indian economy seen the worst of the coronavirus storm and the after-effects of the economic lockdown? Yes, it seems to be so – looking at the recent gains made by the Sensex and Nifty indices. So after being in a "wait and watch" mode for practically the entire year, can the Indian investors finally look at a growth trend for the rest of 2020 - and for the next decade? Surely, they can!
Having said that, the rules of good investments remain the same as before. As an investor, you must look at “basket” of industry sectors where you can park your money.
Here are 5 of the best and promising industry sectors where you can expect a growth trajectory.
Are you serious? After all the turbulences that this industry sector has faced in recent months? The Yes Bank and IL&FS problems, the rising non-performing assets, and so on!
Yes, despite these challenges the banking sector is looking bullish right now in 2020!
At the same time, consider investing in private banks against most public sector (or PSU) banks. While most of the credit offtake (70% of loans) are from PSU banks, private banks have an opportunity to improve their credit offtake.
While the BSE Banking Index has lost 40% of its peak value from December 2019, investors can expect healthy long-term returns from this sector in the coming months and years.
Despite the economic challenges, the Indian government continues to invest more – through a slew of infrastructure projects including expressways, railway lines, and freight corridors. With this major push into public infrastructure and construction, investors can expect good returns from infrastructure project companies that have a good track record and healthy order book.
With India still lagging in the infrastructure space, there is plenty of long-term scope – at least for the next 4 years of the Modi government. Thanks to higher infrastructure spending, other ancillary industries like the Cement sector or companies that support infrastructure projects are also likely to benefit and are safe investment bets.
Even before the COVID-19 pandemic applied the brake, the automobile sector in India has been on the decline for the last few years due to a slump in car sales for most brands. The current financial year has been the worst for the automobile sector with a 15% decline in production.
Despite its ongoing troubles, the future holds good for this industry sector thanks to the government’s growing spending into public infrastructure along with the cyclical trend (high and low every 4 to 5 years) that is specific to this sector. Additionally, the emergence of electric vehicles on Indian roads is expected to boost automobile production in the coming decade.
While the BSE Auto Index looks to have bottomed out (thanks to the COVID crisis), it is also a good opportunity to invest in sound blue-chip automobile companies that are available at a low P/E ratio.
4. Information Technology
The Indian information technology (IT) industry is going through a transitional change now. With the advent of the COVID-enabled lockdown, IT companies have most of their employees working from home; add to that the job cuts and hiring freezes. While a few of these companies are likely to continue with such working policies even after the work-related restrictions are lifted, the industry thus will try to scale up its operational efficiency through a complete revamp.
Nevertheless, with the BSE IT index having grown three times over the last decade, the IT sector has always delivered for its loyal investors. However, by the looks of it, the IT sector seems to remain in choppy waters for some more time. Hence, it is advisable for investors to wait before purchasing major stocks at lower prices.
5. Consumer Electronics
According to the Indian Brand Equity Foundation (IBEF), the consumer electronics market is expected to double its current value – to reach $21.18 billion by the year 2025. This includes electronic appliances like refrigerators, televisions, air-conditioners that are still underutilized in the Indian rural market.
Just like every other market index, the BSE Consumer Durables index has also been weakened since February this year due to the corona pandemic. As expected, the corona pandemic has weakened the BSE Consumer Durables index since February this year. However, it is expected to show an upward trend towards the end of 2020 and the following year – making it a good investment sector for investors.
In summary, these are just 5 of the industry sectors that we are expecting to rebound once the “worst of the pandemic” is over and the overall Indian economy is restored to its previous best. However, as an investor, you are recommended to look at these five sectors from a long-term perspective and select the stocks that fit into your investment goals.