Monday, January 4, 2010

Sectorial Overview : 2010

This is the end of the calendar year 2009. The year started with a depressed market. However, the market sentiments made a U-turn in the course of the year and the markets are closing with over a 100 percent gain from their lows. Positive sentiments are prevailing in the markets. The market will appreciate even further from the current levels as the world economy is improving and the earnings of domestic companies would gain momentum in the coming few quarters. 

In general, every stock with strong fundamentals has the potential to gain during a bull run. However, some sectors usually perform better than the others. Investors have to analyse the economic and business conditions, and figure out the favourably-placed stocks and sectors in order to get better returns in the markets .  

Based on the current situation , these are some of the sectors that are expected to perform well in the medium to long terms: 

1. Information technology:  

The information technology sector has performed very well during the second half of 2009. Positive developments in the global economic conditions have kept the IT stocks in a bullish mode. As economic conditions are improving in the developed markets, these stocks will perform well in the near to medium terms. However, investors should track the currency movements in the international markets. The sharp appreciation of the rupee against the dollar can play spoilsport for these stocks. Investors should invest in large-cap companies with strong balance sheets for better gains. These companies also have a wider base and more power to hedge against sharp currency movements.  

Stocks to look for: TCS, Infosys, Wipro, Tech Mahindra. 

2. Auto:  

The automobile sector is another one where stocks appreciated significantly this year. Most of the frontrunning companies in the auto sector have managed to show good volume growths during the last few months. The volume growth is expected to remain strong given the positive sentiments of consumers and availability of easy financing. Those invested in this sector can stay invested with a short to medium term perspective.  

Stocks to look for: Maruti, M&M, Tata Motors, Hero Honda. 

3. Public sector units:

Investors can look at taking positions in select public sector unit (PSU) stocks. There are talks on consolidation, disinvestment, increasing the public holding etc. These stocks are also good for diversity in a portfolio. Investors should do their homework before taking any investment decision. For example, the proposed disinvestment is not going to change anything from the control perspective of PSUs and the money collected as part of this disinvestment would mostly go to the government. 

Stocks to look for: NTPC, ONGC, SAIL, SBI. 

4. Hospitality:  

As the domestic economy is coming back on to a high growth path and the world economy is coming out of recession, the hotel industry is expected to benefit. Currently, India accounts for around 0.5 percent of world tourism. A strong GDP growth, improving infrastructure, confidence in the country's economic prospects, and open sky policy has improved the outlook for the tourism industry here. This positive outlook would increase the number of foreign tourist arrivals in the country. Domestic tourism is also gaining momentum due to increased confidence of consumers, rising disposable incomes, cheaper airfares and better connectivity.

Stocks to look for: Jet Airways, ITC, IHC. 

5. Power:

Power is one of the sectors that have a huge potential to grow here, but investors looking at investing in the power sector should plan for the long term (more than 2-3 years) as this sector is investment-intensive and returns are mostly back-ended. With a stable government at the centre, one can expect more reforms and ease in terms of structural issues to execute projects. 

Stocks to look for: Reliance Power, NTPC, Tata Power.

6. Pharma:  

Traditionally, the pharma sector is seen as a defensive sector in the market. However, the stocks in pharma sector have given very good returns in the recent past. The pharma sector growth in the recent past has been driven by the growing middle income segment and their growing affordability, and greater access to healthcare. The outperformance of pharma stocks is expected to continue in the medium to long terms. Pharma stocks also add diversity and defence to the investment portfolio. 

Stocks to look for: Ranbaxy, Sun Pharma, Glenmark, Apollo. 

Source: Economic times.


  1. I think a balanced portfolio comprising of a mix of interest rate sensitives and defensive stocks is what we have been playing for some time and we are likely to play that going forward. Pharma is one of the significant overweights for us as a fund house. Pharma sector will do extremely well next year. It has done well in the past few months as well, but we think the outperformance will continue. As far as other interest rate sensitives are concerned, I think it would be more sock specific rather than sector specific as we go forward...

  2. Yes though we are seeing very stock specific movement in this markets.
    Pharma, Auto ancillaries, small & mid cap IT & ITes & Infra, hotel, and food stock companies will do very good in this market.
    Market is also expecting the pre budget movements.