Sectors to Watch

In the earlier articles, I had mentioned that you should track sectors and select stocks from sectors which you feel would go up and sell of stocks from sectors which are not likely to do well. The experts say the economic conditions have changed and the conditions are improving.

The stock market index in creeping up, but has not yet touched the highs it had touched. So the time is right to invest and as I had said earlier, look out for sectors which will help us reach our goal of making money when the market is growing. The money inflow in the market has been increasing and as recovery picks up, more money will flow.

As more money flows in the market index will rise. But there would be other factors which are driven by nature and one of them is the monsoon. Monsoon will play a significant impact on the economy. So we have to track the monsoon. As markets rise, every stock with good fundamentals will rise.

But if the sectors in which these stocks are are on the growth path, the prices of these stocks will rise faster than the other stocks. Let us look at some of the sectors:

Information Technology (IT)

As the economic conditions improve this sector has the potential to do well. They would do well more in the domestic sector with the government taking up a lot’s of IT initiatives. One of the big ones would be the UID project. The major revenue of most of the companies is from International project.

That means billing in dollars. So we should also keep a track of the currency rate movement. If the rupee gets strong the profitability of the company with major exposure in dollar billing will see an impact on its bottom line.

Auto

As the economic condition improves, so will the salaries. This means more disposable income, leading to better lifestyle. As lifestyle improves people go in for cars, those who already have cars, want better or bigger or new cars. To take care of this, companies will be launching newer and better models to increase sales.

Though interest rates are expected to go up, it would not have a major impact on this sector as the amount required per car would be small. The stock prices in this sector are already seeing an upward trend, so fresh small purchases should be made with every dip in the market.

Pharma

This sector is most likely expected to grow, thanks to the US signing the healthcare bill, which plans to make healthcare affordable. This would increase the sales of medicines.

Infrastructure

This is one sector which has a good growth potential. Our economy is growing and with that the government is also spending more on improving the country’s infrastructure.  As you must be aware most of the infrastructure projects have a long gestation period. So only investors, with a long term view should look at this sector.

Banking

This is one sector which has been growing for some time. With infrastructure improving banks will start moving into areas which were not being serviced properly.  With interest rates on the rise, this sector will benefit the most. Whenever there is a rise in the interest rates, the loan terms are reprised immediately.

You must have experienced this with your loan. But when it comes to raising the interest rates on deposits, it happens slowly. The interest rate of fixed deposits is not revised, you have to break the fixed deposit and apply again, where again you lose, but the bank profits and if that happens the stock price will rise.

Having looked at some of the sectors, now start looking at stocks within these sectors.