Best Sectors in the Indian Stock Market: An Overview

According to the Asian Development Bank, the Indian economy is projected to expand by 7.5% in FY2022 and by around 8% in FY2023, supported by a rise in public infrastructure expenditure and a pick-up in private sector investment or stock market. Driven by the performance of their investments in the previous fiscal year of 2021, investors are willing to allocate a higher proportion of their savings to capital instruments in 2022 and are also motivated to invest in the expanding sectors in India.

It is predicted that by the end of the fiscal year 2022, the Indian Stock Market will have advanced and grown to be the fifth largest in the world in terms of market value. Various stepping stones, such as government efforts, foreign relations, market dynamics, etc., will undoubtedly assist the market’s expansion.

When it comes to selecting companies to invest in, the first item that most investors consider are trending stocks, which provide exponential returns. However, picking trending stocks will not yield long-term gains. Therefore, investors must alter their investment strategy by investing in the finest stock market sector expected to expand in the near future.

To generate long-term earnings, you can invest in sectors that are expanding. Few industries, such as consumer packaged goods, mining, and health care, are never out of demand. This post will discuss the promising industries in India for investment. 

• List of Best Performing Sectors in India

1. IT Sector
2. Health and Insurance Sector
3. FMCG Sector
4. Infrastructure Sector
5. Renewable Energy Sector
6. Real Estate Sector
7. Autmobile Sector
8. Fintech Sector

• Information Technology (IT) Sector

In the past two years, the IT Tech business has flourished, particularly in the fields of Artificial Intelligence, Data Analytics, Data Science, and Big Data. The IT business has expanded at such a rapid rate and magnitude that it is almost inconceivable. Approximately 33 Indian IT start-ups have earned “Unicorn” status, signifying that their valuation exceeds $1 billion. The Nifty Index of the IT Sector has returned a stunning 132% over the past two years. India has over 560 million internet users, making it the second-largest online market after China. It is evident that India is thriving in this industry.

Examples of IT Sector Companies:

• Health and Insurance Sector

Healthcare is quickly becoming one of India’s most significant industries in terms of revenue and jobs. An aging population, a rising middle class, a soaring percentage of lifestyle diseases, heightened concern for public and private partnerships, accelerated adoption and implementation of digital developments in technology, as well as telemedicine, as well as a significant increase in investor interest and FDI over the past two decades, are all propelling the growth and prosperity of the Indian Healthcare Sector.

Hospitals, Pharmaceuticals, Diagnostics, Medical Equipment and Supplies, and Medical Insurance are, according to the government, the five components of the healthcare and insurance business. In FY2020, the average percentage of insurance premium was 3.76 percent, the average percentage of life insurance premium was 2.82 percent, and the average percentage of non-life insurance premium was 0.94 percent. In FY2021, these percentages increased to 4.2% for insurance premium, 3.2% for life insurance premium, and 1% for non-life insurance premium, respectively.

Since 2016, India’s healthcare business has expanded at a Compound Annual Growth Rate (CAGR) of approximately 22%, indicating that India was doing well even before the pandemic, and that the numbers skyrocketed during and after the outbreak. India’s healthcare market is projected to develop at a 39% CAGR to $372 billion by the end of 2022, mainly to the country’s expanding middle class, especially among the younger generation, and improving financial literacy and awareness. According to the budget for fiscal year 2021-22, the government proposes to change the Insurance Act of 1938 to increase the FDI ceiling from 47% to 74%.

Example of Health and Insurance Sector Company 

• FMCG Sector

The FMCG sector is the most secure sector in India because their products are necessities that will always be in demand. People may delay purchasing luxury items, taking a trip, or investing in real estate/stocks, but not necessities such as packaged foods, medications, consumables, dry goods, beverages, and hygiene. Therefore, if you are searching for a secure industry to invest in, investing in the FMCG sector over the long term is your best option. Therefore, FMCG companies have a great deal of growth potential and are one of the most favoured industries for investors in India.

Examples of FMCG Sector Company 

• Infrastructure Sector

As India is a developing nation, the infrastructure industry has greater growth potential in the coming years. In its recent budget for 2022-23, the government stated that it will invest extensively in infrastructure to construct trains, roads, airports, motorways, expressways, shipping, aviation, waterways, mass transportation, ports, and logistics. Therefore, it will contribute to the country’s economic prosperity. However, infrastructural expansion is contingent on human capital.

As infrastructure is one of the fastest-growing industries, you can invest in infrastructure companies for the long term to maximize your returns. The government has also started other programs, including Make in India and smart cities.

Examples of Infrastructure Sector Companies: 

• Renewable Energy Sector

We are all aware that environmental conditions are deteriorating, and as a result, the Paris Agreement places every country under immense international pressure to cut carbon emissions. Renewable energy has emerged as an extremely potential investment industry. Sales of solar panels and other renewable energy equipment are at an all-time high, and renewable electricity is getting more inexpensive. India aims to install 175 gigawatts of renewable energy by the end of 2022.

The Renewable Energy Investment Promotion and Facilitation Board (REIPFB) was established by the Ministry of Power to give one-stop help to industry and investors for project development and new investment in India’s renewable energy sector. In addition, over $79 billion has been invested in renewable energy in India during the past seven years, and India’s installed renewable energy capacity has more than doubled to over 141 gigawatts over this time period. Between April and July of 2021, investment in India’s renewable energy sector surpassed the previous high of $6.4 billion set in FY2020-21.

Examples of Renewable Energy Sector Companies:

• Real Estate Sector

The Indian real estate industry is likely to gain momentum in the future months, as it is currently going in the correct direction. With robust end-user consumption and tranquil market conditions, the average quarterly sales volume is likely to surpass that of the pre-COVID year. The unfolding of events as a result of Omicron is a significant influence in determining the sales dynamism following any lockdowns. Important real estate markets such as Pune, Hyderabad, Bangalore, Ahmedabad, and Mumbai have already surpassed their expansion targets.

Examples of Real Estate Sector Companies: 

• Automobile Sector

Leading automobile manufacturers from around the world are entering India and establishing production plants to harness one of the fastest-growing markets. Also, Indian players like as Eicher Motors (whose Royal Enfield motorcycle sales have been increasing), Maruti Suzuki India Ltd, Tata Motors Ltd, etc. are releasing new models, facelift versions, etc. to meet consumer demand. And also EV stocks were also performing well in the recent times.

Individuals’ increasing disposable wealth has led to a preference shift toward the four-wheeler market. The expansion of the vehicle industry will also result in the expansion of the automobile component industry.

Examples of Automobile Sector Companies: 

• Fintech Sector

In India, the fintech industry has experienced enormous growth over the past decade after gaining momentum with the spread of internet services in the country. India is one of the world’s fastest-growing fintech marketplaces, with a fintech adoption rate of 87%, compared to the global average of 64%. More than 6,636 fintech businesses in India resulted in a market size of $50 billion in 2021, and $150 billion by 2025, according to estimates.

With the advent of new reforms and technology advances in the digital payment landscape, India’s fintech industry is anticipated to develop at a Compound annual growth rate (CAGR )of 20% and reach a transaction value of $138 billion by 2023.

UPI (Unified Payments Interface), an innovative mobile app-based payment system designed by the National Payments Corporation of India in 2016 to move payments between bank accounts, is the driving force behind the Fintech revolution in India. UPI, with over 338 banks registered on the platform, processed over 6.28 billion transactions totaling 10.62 lakh crore in July 2022.

India has the second-largest population without access to financial services, with 190 million unbanked people, despite experiencing exceptional growth in the past few years, which has been supported by the growing internet penetration.

To include all populations within the scope of financial inclusion, the Indian government has taken significant measures to simplify regulatory compliance for both traditional banks and fintech companies. It has resulted in the proliferation of technology-based financial service providers offering banking services across the country. Using technology, fintech firms are working with incumbent banks to provide banking services to a large portion of the population with low cost and paperwork.

Examples of Fintech Sector Companies:

Conclusion

Now that you know which industries will develop in the future, you may choose to invest in those industries/sectors. If you are a long-term investor, you should consider the finest sectors while selecting long-term equities.

Choosing sector-specific stocks can assist you in generating long-term profits. Ensure that the sector has a significant growth potential over the next ten to fifteen years. Investing in the stock market is however risky. Check the company’s annual report as well as its balance sheet, cash flow statement, profit and loss account, fundamental ratios, and the cyclical nature of the industry to make informed decisions. Before making an investment decision, consider your investment objective, risk tolerance, and investment timeline.

FAQ’s

• Which stock market sector is best for investment?

The energy sector, the real estate sector, the banking sector, and the infrastructure sector are among the best investment sectors.

• What is the minimum age to invest in stock market ?

First-time Demat account creation does not require a minimum age of 18 years, contrary to widespread assumption. There are no age restrictions for investing in the Indian stock market. You can open a Demat account to trade on the stock market regardless of your age.

If you are under the age of 18, your parents or authorized guardian may manage your Demat account following submission of the appropriate documentation. When you reach the age of 18, the participant in the Depository will send you an invitation to complete the paperwork required to transfer your information and grant you the authority to administer the account on your own.

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