Dr. Sanjiv Agarwal
The business and economic environ in the country seems to be recovering from the slow down and with most of the signs being positive, it looks like bullishness in economy in times to come. Translated to investments, markets and returns on most type of investment options look brighter in times to come.
Be it inflation, corporate performance, economic indicators, policy decisions on revival and reforms…… all appear to be on positive and proactive side. Politically too, the policies and ideology of the present government at the centre gets endorsed in the form of recent election results.
Investors who have been sitting at the fence for quite long now should venture for fresh investments now. However, one needs to keep in mind the sectors which will perform better and grow faster. For example, if an investor is looking for stocks, he may avoid banking sector or sectors which are vulnerable like real estate or those affected by disputes or litigation such as coal, telecom etc and look for rather fast growth stocks, say from e-commerce or online retail, SME segment, education etc. Companies engaged in affordable housing projects would also gain in long run.
Similarly, with crude oil prices falling (35% in last 3 months), one should look at stocks that benefit from such fall in crude prices. This would also increase corporate earnings. Oil companies, paint manufacturers, tyre industry, companies engaged in plastics, ONGC etc are likely to benefit.
Some of the public sector undertakings where reforms and restructuring is on cards, may also be picked up.
Further, there are certain companies which are cyclical in nature (cement, fertilizers etc) which are likely to earn more with increased economic activities and development. With rise in household incomes, capital goods, automobile and financial services sectors will also grow relatively better.
On the other hand, investors ought to distance from stocks which are facing the regulatory challenges and scrutiny (such as Jindal Steel, DLF, GSK Pharma etc).
With slow credit off take, banks are likely to reduce the interest rates on deposits, thus making investors look at other avenues to increase return on investment (ROI). With lower ROI, investors may not go for bullion, given the present dynamics of gold prices though there is huge demand – supply gap giving room for moderate to high returns. But in long run, investors may have to look at stock market for the present. This is not a bad proposition provided investors are able to identify the stocks based on both-historical pattern and projections.