Top 5 Sectors to Invest in FY 2010-11

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New financial year 2010-11 kicks-off much on the back of pompous global recovery witnessed during the second half of the FY 2009-10. And, equity markets are no laggards in terms of catching these cues before hand.

However, the markets have remained largely range bound since June 2009 to March 2010 within the range of 4500 to 5300 on the Nifty index. This range bound movement can be termed as a broad based consolidation after a scorching pace of market recovery from its recessionary trough levels.

Now, that markets are again back at Nifty 5300 levels, it is on the verge of a likely breakout. Hence, it would be a prudent idea to have a check as to which sectors and industries would it be worthwhile for the investors to plough their hard earned money. Investors would be keen to know which sectors are placed better to be among winners for the FY 2010-11.

1) Power Sector

powerWith the rising population and growth story of India, the need of fast paced growth in power generation is increasingly gaining importance. Energy is one of the major contributors to the economic development of a country.

The government has targeted electricity for all by 2012 by the end of 11th Five Year Plan. The demand of electricity is growing exponentially. And, herein lays the opportunities for investors to plough their money in public and private sector companies both.

At present, coal based thermal power plants accounts for almost two-thirds of the energy needs of the country. However, the government is increasingly becoming aware about the benefits of generating power through cleaner nuclear power plants.

More recently, during the Budget 2010 announcement, the government has also laid emphasis on the development of non-conventional energy resources such as Solar and Wind Energy. Rural electrification is also a significant initiative by the government to allow access to electricity in remote regions in India.

Stock Picks: NTPC (Power Generation), Power Grid Corporation (Power Transmission), Tata Power (Power Generation) and Rural Electrification (Power Sector NBFC) and BHEL (Power Equipments).

2) Food Processing

Food-processing

As the growth of the economy chugs forward and consequently generates more employment and raises the standard of living of the middle class population; the demand for dynamic and processed food products will witness a manifold rise.

The processed food comes with enhanced food life and value added services to the raw form of food products. It also provides boost to the farmers as increasingly modern techniques goes into production of food and other activities involved thereafter. As per an estimate, Indian food industry is expected to grow to $280 billion by 2015.

The food processing treatment can be spread across various food products like products with low shelf life such as fruits and vegetables, dairy products & grain processing and storage among various other fields related to food products.

The upcoming years are likely to witness a fast growth in ready-to-consume food products like health drinks, frozen food products for low-shelf life food articles, readymade Aata (flour), fruit juices, ready-to-cook meals, quicker snack products like noodles and pastas, etc. with increase in percentage of working couples and busy life style.

The total plan allocation to the food processing industry has gone up sharply from Rs.650 crore during the 10th Five year plan to Rs.4030 crore during the 11th Five year plan.

Stock Picks: ITC, Ruchi Soya, LT Foods and REI Agro.

3) Banking & Finance

banking-finance

Banking industry is said to be a mirror of an economy’s health. A Sound banking system serves as a significant trade enabler to the country. During the recent global crisis, Indian banking industry came out with flying colors on the back of stringent stipulations laid down the Central bank.

With the opening up of the sector in early Nineties by the government, the industry has received a significant boost by the emergence of the private sector banks which increased competitiveness and enhanced the level of banking facilities to a top notch level.

However, during the recent global recession, even the lagging public sector banks have made a big come back on the back of large up gradations to suit the hi-tech services provided by the private sector and foreign banks.

For a sustained economic growth for the country, unmatched banking and financial services is a must in order to facilitate the increasing need of swift and hassle-free transactions. Banking sector is an enabler to the economic growth.

Stock Picks: HDFC Bank, SBI, ICICI and Bank of Baroda.

4) Infrastructure

Infrastructure

The economic development of a country is directly linked with the infrastructural status of the country. Infrastructure not only acts as a enabler to higher growth but also generates employment and serves the social needs of the people of the country.

If the economy is an emerging one like India which is a laggard on the infrastructural front, the growth in the infrastructure industry gains all the more importance. High transaction costs arising from inadequate and inefficient enabling infrastructure can go a long way in stunting the growth rate of the economy.

The broad term of infrastructure can cover a wide range of infrastructural facilities from ports and road, rail, transport, aviation, water needs, mining and construction among other fields of operations. Better infrastructure can lead to faster enabling services.

Stock Picks: L&T, Patel Engineering, IVRCL Infrastructure, Hindustan Construction (HCC and Thermax.

5) Oil & Gas

Oil-Gas

One sector that has disappointed until now is Oil and Gas sector. The prospects of the sector have witnessed a lagging demand as the global economy is still to witness a complete recovery. The recent crisis has stolen a huge chunk of the demand of oil and gas which is needed to stoke the growth engines of every major economy.

Most of the large companies were building new capacities before the breakout of the recession. This new capacities led to excess supply and falling demand at a time when the demand was hit on account of slowdown and crisis. This led to plunge in the operating margins of the refiners who were stuck with excess supplies of crude products.

However, with the recent advent of a recovery on the horizon, there is a gradual pick-up in the global demand for oil and gas, as economies are back to pump money for higher capacity utilization of their resources in order to meet increasing demand of goods and products. Demand for petro products is expected to improve over next one year.

Stock Picks: Reliance Industries, Gail, Essar Oil and Cairn India.

Note: With so much of buzz going around in the Education sector, I was inclined to include this fast growing industry in the above article. However, the above article is created taking in to consideration the prospects of equity market returns for investments in FY 2010-11. Whereas, education and healthcare industry holds great prospects in India but from longer time span of more than just one year.

On which sector are you betting the most?

Disclaimer: The above content/report is only for the educational purpose of the readers. It does not qualify as any advice or recommendation to Buy/Sell securities. The author and the blog are not responsible for the reader’s decisions based on the above report.

  1. […] latest report on the Wall Street Journal by Shefali Anand enlists five top-stocks from various different sectors for Indian investors that can be bought even at current market valuations based on certain analytical […]

  2. Yamini Patwal says

    Hello Viral
    I find your blog is very informative one and the things that you have mentioned is very useful but i too feel that you missed out some of the growing sector like Tourism, Education , Pharmaceutical and also the entertainment sector. All these are contributing a lot in the country’s growth along with the above mentioned sectors.
    I hope u’ll be including them in your next posts.

    Also i want you to suggest me a stock which i can study and find more information about the
    industry, company, and its contribution to the economy.

    Looking forward for your reply.

    Thanks & Regards

  3. zuhaib says

    Viral,
    I found all the information in your blog very informative, but, what i feel missing is that you have not mentioned anything about the tourism sector, which I feel is growing by leaps and bounds.
    I also feel that could have been incorporated in your report.

  4. Chintaguntla Murali says

    food processing and pharmaceutical sector are my favorite sector. food all ways need the people and pharmaceutical sector all so importance for to day.

    1. jay bhati says

      hi,
      I am new in trading field and i am not able to understand which share is best to buy and there are lots of share, i am totally confused.
      can you suggest me some best share to invest.

      thanks
      jay bhati

  5. Rohit Khilwani says

    food processing and infrastructure are my Favorite sectors.. FY 12 13 is going to be grt for these sectors on my expectations.

  6. mohan says

    hi i m mohan my graduation is in information technology(BE) in 2011…actually want to do mba & pursue career in finance sector …. i was given exam for mba but my marks r not good….please tell me what to do in this current 1 year …..i e. whether i go for job in IT industry & do it about 2 years & then do mba ……please suggest & lave reply to my email id.
    regards
    mohan

  7. Amit Hardiya says

    I absolutely adore reading your blog posts, the variety of writing is smashing.This blog as usual was educational, I have had to bookmark your site and subscribe to your feed in ifeed. Your theme looks lovely.Thanks for sharing.
    Regards

    http://www.livesharetips.com/stock-tips.html

  8. Amit Hardiya says

    I absolutely adore reading your blog posts, the variety of writing is smashing.This blog as usual was educational, I have had to bookmark your site and subscribe to your feed in ifeed. Your theme looks lovely.Thanks for sharing.
    Regards

    http://www.livesharetips.com/stock-tips.html

  9. jyoti manekar says

    you information is very usul for me.
    thank you.
    i am not regular invster but i am inetering for long term investemt.
    i am lecturer in electronics & i know very little about market
    thank u very much.
    jyoti manekar

    1. Lourd says

      Insurance is best for long term investments.

  10. Gopal Modani says

    which is the best sector to invest ?

    1. Lourd says

      Mutual fund nd Insurance is the best sector to invest

  11. susovit nandy says

    all these are good and Most of the large companies were building new capacities before the breakout of the recession. This new capacities led to excess supply and falling demand at a time when the demand was hit on account of slowdown and crisis. This led to plunge in the operating margins of the refiners who were stuck with excess supplies of crude products.

  12. Madhav Shivpuri says

    Viral,

    Good post. I am wondering how you did your stock picks for specific sectors? Is it a general hunch/ or top companies in each sector or did you consider any particular parameters?

    Off topic- With respect to power generation I had this question for some time now- why many Indian companies which got into power generation in the last 2 years have been using coal as their raw material instead of clean energy? While global climate change was clearly on the agenda why did many Indian companies and Govt. continue with coal energy? When pollution controls kick in will these companies be forced to puchase Renewable Energy Certificates (RECs)? In such a case, will the companies be profitable as expected (based on their current valuation) or their NPM will go down?

    1. Viral says

      Hello Madhav,

      Speaking about stocks picks for each of the sectors, I have opted for ‘Top picks’ amongst each industry. For example, NTPC generates majortiy of the power that India consumes, Power Grid has a nation-wide monopoly in transmission lines, BHEL is a leader with over Rs.1 lac crore of pending Power equipment orders.

      Similarly for other sectors too… most of the companies mentioned above are top picks from each of the respective industries. However, they are not screened through the valuations perspective from the equity market point of view. The aim of the post is to highlight the top sectors and hence I did not go through details regarding stock picks except top picks from each indsutry.

      Your point of contention on coal-fired power plant has left me thinking about a few aspects.

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