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Anand

Saturday, January 28, 2012

Sectors That Will Outperform in 2012


The Indian Stock Market is comprised of thousands of stocks, each of which is divided into their respective Sector. For ex: ICICI Bank, HDFC Bank etc. will come under the BFS Sector (Banking & Financial Services). Similarly, there are numerous sectors in the Indian Stock Markets.

As with any stock market, stocks from one sector may outperform or underperform their peers in the same sector. Also, one sector as a whole may outperform or underperform when compared to the other sectors in the market. This year 2012, promises to be an exciting and challenging year for the Indian Stock Market. The purpose of this post is to provide an outlook about some of these sectors that may outperform the others.

Caution: This is just a Sectoral Performance Outlook. Some Stocks that fall in the below mentioned sectors may perform poorly when compared to its peers. This is not an investment advice. Please exercise caution before investing in any stock in any sector.

The Following Sectors Might Perform Well in the year 2012:
1. FMCG
2. Pharmaceuticals
3. Information Technology
4. Textiles

FMCG – Fast Moving Consumer Goods

The FMCG Sector offers the most conservative or defensive options in the current market scenario. The consumption demand for FMCG products continues to be strong in both local and international markets. Also, the domestic consumption is growing irrespective of the interest rate cycle and the domestic economic scenario. As a result, the FMCG sector is expected to do well in the future.

Trivia:
If you are thinking, how the FMCG Sector can grow in such a volatile economy, think about this. “Right from the moment you wake up to the time you go to bed, you use some or the other FMCG product. Toothpaste, Mouthwash, Soap, Shampoo, Deodorant, Mosquito Repellent etc. and etc.” The list is endless. With growing populations in India as well as around the globe, do you really think the demand for FMCG products will come down???

Pharmaceuticals

Emerging Markets like India and China are densely populated. Even with the rapid industrialization in both countries, the penetration of advanced health-care is still not as far-fetched as in developed nations like USA, UK etc. Major Healthcare Providers and Pharma Manufacturers are looking to expand in Emerging Markets to tap the huge growth potential in the Healthcare industry. As India grows to be one of the best Nations in the World for Medical Care, the growth of the Pharma Industry is expected to be in line.

Over the past couple of years, some of the large Pharma Players have remained stable despite the broader market correction. And, this is expected to continue in the year 2012 as well.

Trivia:
If you are thinking, how the Pharma Sector can grow in such a volatile economy, think about this. “Everyone Needs Medical Care. Newer Diseases are being discovered now and then. Newer medicines, high-tech machines are being used in medical care throughout the nation. In the past decade or so, with the advancement in Medical Care, the mortality rate has come down significantly. Everyone wants to live a long and healthy life and that is being made possible by Medicines.” Do you really think that the Pharmaceutical companies that manufacture these medicines will not do well???”

Information Technology

The IT Sector has been the darling of the Indian Stock Markets for over a decade, up until the economic crisis a couple of year ago, of course. The good thing about this IT Sector is that, it is not sensitive to the Interest Rate Movements in India. Also, the Indian Rupee has depreciated significantly against the US Dollar and other foreign currencies. So, the revenue is bound to rise just by the sheer movement in the value of the Rupee.

Moreover, the whole world is reeling under severe economic stress. With rising costs and the ever present need to reduce costs, Large Company’s worldwide are looking at lower cost outsourcing locations like India and China. So, the IT Sector is expected to continue to grow well in the year 2012.

Trivia:
The IT Sectors Growth comes with its fair share of challenges. Rising costs, Rising Attrition Rates, Visa Restrictions, Lower Profit Margins etc. However, IT Cos are finding out ways to cope up with the situation and continue to post good profits and grow well.

Textiles

The Textile Industry, which was in dire straits over the past few years, has started its reviving phase. The formerly lacklustre demand for quality clothing materials is now on a gradual rise. If we consider the rising demand in the local markets (esp. in Cities) the major industry players have entered into an expansion mode. With a bulk of their revenues coming from exports, the rupee depreciation has brightened their prospects even further. So, the Textiles sector is expected to continue to grow well in the year 2012.

Trivia:
If you are even tempted to think “Will the Textiles Sector do well?” just ask yourself this question “Can I live without clothes?” Of course, you cannot. Are you someone who lives in a major city like Chennai, Mumbai etc.? Have you visited one of those huge shopping malls? Have you seen the kind of crowd that the Textile Showrooms have? Now, go back to your doubt and think again “Will the Textiles Sector do well?” and you will answer it yourself “I Think YES”…

Some Final Words:

Even though, the Indian markets are looking to get back on the bulls back, these are the times when investors must be cautious. We must not get carried away by the fact that the markets have bounced back and we can start buying anything and everything. At such times Investors must follow an Accumulative Approach. This means, you must gradually buy fundamentally sound companies with a consistent track record. The impetus is on “Gradually”. If you play on buying 1000 shares of some company, don’t buy it in one shot. Instead, split it up into 250 shares and buy it 4 times over a period of 8-12 weeks. This will give you ample time to revisit your decision or take advantage of price corrections that are bound to happen in such turbulent times.

Last but not least, done expect to make quick bucks in this market. It would be suicide. The best way is to invest in good companies and let the investment grow over a period of a year or so and then try to reap the rewards…

Happy Investing!!!!!

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