The stock market is unpredictable. But unfortunately, it is the nature of the market, and all investors must learn to live with it.
Whilst you cannot always time the market ups and downs to perfection, what you can do as an investor is study market trends to gauge the level of market transformation. It will help you to figure out emerging sectors that can offer high returns in the long run.
So, if you are looking for long-term investments in India, the top 5 sectors offer tremendous potential this year and beyond.
With almost 2x adoption every two years before the pandemic, the Fintech sector in India has grown tremendously. However, Covid-19 was a boon for the industry where it became a critical commodity for the world.
There was the rapid adoption of Fintech solutions by organizations of all sizes and across sectors to facilitate their day-to-day business and remain afloat.
A record US$ 98 billion was invested in Fintech in the first half of 2021 alone, probably why Motley Fools calls it the most significant growth market of the 21st century.
Major Fintech companies are expanding at a 30% to 50% revenue annually. Therefore, when buying stocks, the focus should be on innovative companies adding value and convenience to their customer base.
With this perspective in mind, Fintech stocks can be perfect for retail investors looking for low-risk investments in the long run.
The automobile sector in India is in a bullish phase despite the manufacturing challenges during the pandemic in 2021. It is part of their efforts to reclaim their pre-Covid sales volumes and build a strong foundation for long-term industrial growth.
Moreover, the sector has strong support from the government of India. Favourable policies like the FAME-II scheme, the launch of the production-linked incentive (PLI) scheme, and incentives to boost two-wheelers will act as the catalysts to create momentum for the industry.
Additionally, the adoption of electric vehicles, both in two-wheeler and four-wheeler categories in India, will contribute to long-term growth in the automobile sector.
Undoubtedly, this will lead to the development of auto ancillary companies that will support the EV sector in the automobile industry. With the industry’s fantastic potential, the shareholders will reap the rewards in the long run.
3. Information Technology (IT)
The internet boom started in the 1990s. Suddenly we were all part of the information age. IT companies worldwide mushroomed at breakneck speed that it was hard to keep up with their expansion.
Despite the dot com bubble burst that followed, the IT sector has been an industry that has offered consistent returns to its stakeholders. It is because of the growth potential that the industry offers.
Technological advancements, the Government of India’s focus on a ‘Digital India’, the devaluation of the rupee and the revival of the US economy are all contributing factors driving the IT industry’s growth story.
IT stocks like TCS, Infosys, Wipro, HCL, and Tech Mahindra are low risk and perfect for investors looking to accelerate wealth creation over time. Alternatively, you can also look at mid-cap IT stocks that offer quick returns in a shorter time.
It makes the IT sector in India an emerging industry where you can invest with a long-term goal in mind.
4. Healthcare and Pharma
With Covid-19 still not entirely out of the picture, India’s healthcare and pharmaceutical sectors are impossible to ignore.
Currently, the industry has a bearish outlook, but with evolving technologies, research and developments, investments are pouring into this sector like never before. As a result, analysts estimate that the Indian pharmaceutical industry will grow at 9% – 11% in 2022, skyrocketing domestic and international demand.
Moreover, the focus will be on better and more effective treatments and vaccines for existing and emerging conditions that will keep the demand alive permanently in this industry. The government of India also supports significant players in the industry.
These reasons make the pharma and healthcare sector great contenders for long-term investments in India. Look at stocks like Lupin, Sun Pharma, Glenmark Pharma, and Aurobindo Pharma that can potentially deliver high returns.
5. Renewable Energy
2022 will be the year of the renewable energy sector in India. The government of India has already invested over US$ 15 billion in the industry to promote electric vehicles, solar equipment, and green hydrogen and reach the ambitious 175 GW renewable capacity target.
Foreign direct investments contributed another US$ 10.28 billion in the last two decades to drive growth in this sector.
The country’s sales of renewable energy equipment like solar panels are at an all-time high. Therefore, if you are likely to invest in this segment, you must consider having Reliance Power, Indian Energy Exchange, Indraprastha Gas, and Borosil Renewables on your watch list for this year.
For prospective investors, investing in sectors poised for long-term growth in India makes sense. However, it’s essential to remember that even if growth prospects look promising, the market movements still regulate these sectors.
So, always do your due diligence checks, follow a disciplined approach, and diversify your investments across several asset classes to minimize the risk of loss.
*Disclaimer: Please note that the names of stocks in this story are only for illustrative purposes and are not Buy, Sell or Hold recommendations.