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Top Sectors To Invest 2022

Top Sectors To Invest 2022

Posted By: Creditkaro Blogger

Last Update : May 23, 2022

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Top Sectors To Invest 2022   The market with expectations of an increase in interest rate was already being infected by US Fed. Then Russia and Ukraine war started and the sell-off went faster. Foreign Institutional Investors (FIIs) have been releasing the most. But that did not cause a sudden change of heart. FIIs have been net sellers in India since October 2021 in response to the shifting of monetary policy stance of most global central banks, specifically the US Federal Reserve. So, a few sectors are left that have put up with the force of the sell-off. Here are those few top sectors where people still can invest.   1 Real Estate India's real estate sector has been pliant since the pandemic as home prices were steadily supported by low-interest rates. The realty stocks fell as investors grew anxious about the impact of rising interest rates. Higher interest rates would speed up mortgage rates and on the contrary, demand was expected to get dampened. This did not promise well for realty stocks. As a result, the BSE Realty Index fell by 19.5%. But, this drop did not seem temporary as India's real estate sector has been gradually witnessing a healthy increase in demand. The momentum is expected to hold for the rest of the year. The overall market viewpoint starting from commercial spaces to the residential markets is getting bright for the real estate sector.   2 Healthcare The second sector on the list is the BSE Healthcare sector. The index is down 13.3% for the year as shares of healthcare and pharmaceutical companies plunged after they reported an unsatisfactory set of numbers for the December 2021 quarter. The heavyweights showed the way toward sell-off in pharmaceutical stocks with Dr. Reddy's Laboratories dropping a massive 10.3% after its quarterly results failed to impress investors. Feebleness in Dr. Reddy's also resulted in a massive liquidation in the shares of other pharmaceutical companies. Still, looking forward, the Indian pharmaceutical industry may experience an undulating effect of the ongoing Russia-Ukraine war crisis. The key reason is that majority of domestic players have a strong presence in both countries. Pharmaceutical products figure out one of the main exports from India to Ukraine. India is in fact the third-largest exporter of pharmaceuticals to Ukraine, followed by Germany and France.   3 Information Technology The information technology sector has been the third sector that had created maximum impact by the FII sell-off last year. The BSE IT index had fallen 11.8% during the year, underperforming Sensex by a small margin. IT stocks have even been under stress since the beginning of this year. Despite the fact, that IT companies are taking on the impetus and seem to be flooded with a lot of upcoming prospective projects. Cognizant plans to employ 50000 fresh workers from India in 2022, making the boost up from 33,000 last year. Tata Consultancy Service (TCS) has added 77,000 fresh employees in the first nine months of the financial year 2022. The market, however, does not seem to like such massive hiring numbers as this has been creating an impact on the profit margins of these companies. It should also be remembered that salary growth in this sector has been exquisite. Even the Russia-Ukraine war crisis does not seem to have exaggerated the Indian IT sector which has more than 30 to 40% of its revenue coming from Europe. The IT companies' operations in Europe have not been damaged and investors can look forward to investing in this sector.   4. Power The power sector is another sector where investors lookout for investments. It has many companies in common with the utility index such as Tata Power, Power Grid, and JSW Energy. The BSE Power index is also up around 9% so far in 2022. The power sector is gaining due to the gradual improvement of power demand. Big reforms have already started such as the revamped distribution sector scheme and amendment bill of electricity. When the bill will be approved then it could be a big game-changer. Electricity reform has been talked about for some time but the biggest challenge for the distribution sector is the effective implementation given that power is a government-owned business. The proposed electricity amendment bill is aimed at restructuring this. The bill wants to de-license distribution of power and reduce obstacles to private players in their entry into the sector and this will finally help consumers to select from multiple providers.   What next for the market? However, looking forward, an environment beset by high inflation can continue amidst the Ukraine-Russia war disaster. This could pose a short-term challenge for many companies as high inflation can result in lower margins. The market can also become unstable as an increase in interest rates by the Fed in the upcoming months may keep FII investors on edge. But at the same time, they can also give buying opportunities for long-term investors. This can be observed in the buying activities of Domestic Institutional Investors (DIIs), such as domestic insurance companies, mutual fund houses, pension funds, or provident funds which will soak up all the selling and drive the market higher. Investors must stay calm amidst the difficult situations and use this as an opportunity to invest in quality companies for the long term. The prevailing geopolitical tensions will continue to take the centre stage and will be the major force guiding the direction of the market and the sentiment of the investors globally. 

Published on May 20, 2022