Best Indian Sectors to Invest In | srei

Best Indian Sectors to Invest In

According to a report by domestic brokerage SMC, Indian stock markets will hit new highs post general elections in 2014. This is debated by many including Mr. Aditya Narain (MD, Citi India) who thinks that 2014 will be a year to trade, not invest. But will the newly elected government with an improvement in the investment climate likely stimulate the bulls in the markets? High US unemployment, Europe's debt crisis and China's slowing economy are some of the global headwinds that might keep investors on the edge.

The growth in the IT sector will likely be a broad-based one with contribution from all service lines. All the big players in this sector are expected to grow by 15% this year and we will be seeing clients enter IT budgeting on a positive note. This quarter has already seen a rise in sales, aided by a constantly improving deal pipeline. A recent research by Dun and Brad Street says the second half of 2014 might spell success for Indian car companies owing to interest rate cuts which will act as a catalyst in aiding growth. But with EU’s non-tariff barriers and preferential duty agreements with some other countries, India’s dream of being an Automobile Export hub is still a longways away.  Faster economic growth is likely to drive volumes. A fall in interest rates and stable fuel prices are expected to create an environment conducive for growth.

Corporate credit may remain subdued in 2014 however growth in credit to retail segment & small and medium enterprises is anticipated to rise.  The investment cycle may take time for any significant revival and the asset quality of both public and private sector banks will be under pressure. Interest rates on three-five year term deposits are likely to remain firm and private sector banks are better placed than public sector banks to absorb the rising credit costs due to their high margins and low costs.  2014 is expected to be a landmark for the global oil and gas industry. The gradual easing of tensions between US and Iran may lead to normalisation of flow of crude oil from the west Asian country.  Crude oil prices are expected to hover between $95 and $112 in 2014. The consumer durables industry does well when the economy grows especially in a growing economy like India’s and the capital goods market can grow from $71.7 billion in 2011-12 to $153.3 billion by 2016-17.  The power sector has done very poorly over the last few years as profits slumped however the sectors potential is indicated by the per capita consumption of 704 units a year which is minuscule as compared to other developed countries.

When it comes to real estate it is not all doom and gloom for the investor as most real estate stocks are available for as low as a fraction of their book values, making them attractive from a long-term perspective. The same is true for the telecom industry which experienced a game changing year in 2013. The industry will further coming out of the woods this year with reforms, especially the clarity on M&As rules.