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Four Sectors Which Will Reap Investment Benefits In 2021

Coupled with budget announcements, this could be a good time to invest in the stocks of these four high performing sectors.

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Though the stock markets have been highly volatile during the COVID crisis, India closed 2020 on a strong note with gains of about 15%, each on benchmark indices, while the small and midcaps outperformed. Some stocks outperformed in 2020 and will retain the baton in 2021. Coupled with budget announcements, this could be a good time to invest in the stocks of these four high performing sectors.

Pharma: With healthcare being a key focus area (post COVID), not just in India but across the world, pharma sector is expected to grow. MNCs offering China nearly 50% discount, in terms of getting their drugs approved in the Chinese market, can create more opportunities for Indian pharma players. With the anticipation that 60% to 80% of the global population will get vaccinated this year; it is giving huge scope of P&L for pharma companies, Indian pharma companies as suppliers will also get some portion of that. Hence investment in this sector is expected to gain good traction, at least for the next few quarters. It is recommended to invest in large cap pharma, while midcap in transitioning. Mid cap is also witnessing momentum too but large caps would be the preferred choice for the new few quarters. Some of the stock recommendations could be­­­ Sunpharma, Cipla, Lupin and it would be a better option to consider blue chips for investment.

IT/ technology Sector: With growing advent of high speed and smart phones, the IT/ technology sector was already on the rise. COVID 19 had increasingly led to consumer demand, with the concepts of social distancing and work from home. Consumers now prefer to transact virtually through apps or online banking, instead of physical transactions. All of this has led to development of new age technologies, which is expected to grow at a CAGR of 16% and will set the beginning of multi technology transformational phase. This is reflected in the IT stock market performance too. Investors, who are looking at long term growth and protection against inflation, should look at investing in this sector. The sector will continue to upsurge and shape the market’s overall performance. Some of the stock recommendations in Blue chips would be­­­ Infosys ,TCS, HCL Technologies and for mid-caps LT Technology, Sonata Software could be preferred for long term over a time period 0f 2 – 3 years.

Steel: Over the years, domestic steel companies have focused towards import substitution as well as for export promotion. PLI scheme extension to specialty steel gives more push to this objective. Under the PLI scheme, coated products, high strength steel, steel rails and alloy steel bars and rods are included. The scheme would also be instrumental in helping domestic companies increase their manufacturing capabilities and developing new products. With key applications in areas like automobiles, railways etc, specialty steel can offer a good investment option for consumers this year. Some of the stock recommendations in large capcould be­­­ Tata Steel, JSW Steel, SAIL and Vardhman Special Steels could be considered for mid-cap.

Chemicals: This sector can also provide a very good option for investment as global investors are moving out of China and now eyeing on India as a potential market. India’s global market share in this sector has gone up, which indicates a great future in chemical business. Many large chemical companies are investing in expansion of capacity. Chemical stocks too have rallied significantly in the last few years, making it one of the most lucrative sectors in invest in. Some of the stock recommendations could be­­­ Navin fluorine, Aarti Industries, Alkyl amines, Vinati organics.

Though markets have been volatile due to the global pandemic, with a thorough understanding of sectors and defined goals of consumers, stock markets can reap huge benefits. One should understand the nature of stocks before investing in short term, mid-term or long term duration. 

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Nitin Shahi

The author is Executive Director, Findoc Financial Services Group

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