Best Sectors to Invest for Medium to Long Term

Posted by admin in Articles, Featured Articles, Sectors on Apr 19th, 2010 | 3 responses

Source: Economic Times

Presented below is a synopsis of an article published in Economic Times discussing about the best sectors to invest for medium to long term in Indian Stock Markets in FY 2010-2011.

Sector 1: AUTO

The auto sector is doing well over the last few quarters , backed by tremendous volume growth due to the rise in disposable incomes of the middle income group, and launch of new models in the market.

Analysts believe the volume growth is expected to remain strong in the coming quarters and auto stocks are expected to do well in the medium term.

Sector 2: BANKING

The credit growth has picked up over the last few months and is expected to remain strong with improved economic conditions and pick-up in corporate demand.

The interest rates are also expected to go up in the short term which favours banks. Loans are repriced immediately. Therefore, the net interest margins (NIM) are likely to go up.

A higher NIM along with loan growth results in improved earnings in the medium to long terms.

Sector 3: HOTELS & TOURISM

The travel and tourism sector in general is picking up.

The thrust on domestic tourism and rise in disposable incomes of the middle income segment will result in more business for the companies operating in the hotel and tourism sector.

Sector 4: INFORMATION TECHNOLOGY

The information technology sector has the potential to do well as the global economic conditions improve.

Investors should go for frontrunner companies that have well-diversified execution models, a wide base and the power to hedge against sharp currency movements.

Sector 5: PAPER

The paper sector is expected to fare well with improved economic conditions and corporate growth.

The paper prices have moved up over the last few months and the companies are expected to encash on the increased demand and pricing situation in the coming few quarters.

Investors can add some front-runner paper companies to their portfolio to increase diversity.

Sector 6: TYRES

The companies in the tyre sector are expected to do well from a medium term perspective, fuelled by robust demand.

The auto sector (both two-wheelers and four-wheelers ) has had major volume growth over the last few quarters due to improved economic conditions and consumer sentiments . Also, a number of new automobile companies are planning to enter the market.

There are some concerns on the rise in raw material prices (rubber) but the robust demand will help the tyre manufactures to pass on the cost to customers and hence the outlook for this sector is promising in the coming quarters.