Top Sectors To Invest 2022
Posted by Creditkaro
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.
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