Friday, 19 February 2016

5 Best Sectors / Stocks That Have Domestic Consumption To Invest

Posted by RaviKumar Nama
Markets are in bearish mode and every day the Market oscillations are reaching new peaks and causing more worries to the common retail investor. The reasons behind these turbulence are more global rather local. Whatever be the reasons the Market is continuing its southward journey and no one knows when this stops. But, some experts are believing that this is the right to enter the Market as many quality stocks are at their 52-week low price levels. But, the small Investor question is the Markets reached bottom out or is there more pain left? Is it the right time to enter the Market? If so, what are the sectors and stocks are good bet for investing?



Best Sectors That Have Domestic Consumption To Invest:


Most of the Reasons like China currency issues, Crud-oil prices, sluggish Europe economy which are the responsible for recent Market crash, are global. The risk appears to be more global than local. So the stocks that represent domestic economy and consumptions are better to invest rather than the stocks that are more dependent on global factors. These stocks which represent the domestic economy have corrected significantly in the recent market weakness and owned less by FIIs. When growth comes these stocks would be quick to gain. India is mainly a consumption driven economy and steadily increasing from the last couple of years because of the changes in life style and income levels of highly populated middle-class Indians. Also, because of the lower Inflation rate, lower CAD and improved growth rate, the economic fundamentals of India are strong. These factors encouraging to bet on domestic consumption stocks. We will see what are the sectors and stocks that are mainly dependent on domestic consumptions.

1. Pharma Sectors: 

Pharmacy sector is ever growing sector. This sector is showing consistent performance from last couple of years and this will continue in the near future as well. India is becoming World Medical Hub and there is a huge market in India itself. Some Pharma companies are performing extremely very well from the last few years. Although, experts are of the view that valuation of some of the pharma companies remain stretched, but there is lot of room for mid-cap pharma companies. 

Stocks to watch: Aurobindo Pharma, Torrent Pharma, Cadila Health, Cipla, Dr Reddys, Lupin, Elder Pharma, Sun Pharma, Alembic Pharma

2. Auto Mobile Sector:


Auto and Auto Ancillary sector is showing steady growth from the last couple of quarters. Because of the lowering vehicle loan rates, decreasing fuel prices and increasing need of personal vehicles in India, the sales of 2-wheeler and 4-wheeler are encouraging. As this demand is mostly from domestic, the noises from International factors will have least impact on this sector. We need to choose the right stocks from this sector for long term perspective and this sector will certainly yield handsome returns to the Investors.

Stocks to watch: Maruti suzuki, M&M, Hero Corp, Bajaj Auto, Amara Raja Batt, Motherson Sumi, Tata Motors, Exide, Suprajit Engg, JK Tyres

3. Food Sector:


India, the land of spices has always appealed people by mouth watering foods and beverage recipes. Since people here are very fond of spicy snacks and delicious sweets, many indigenous and foreign industries started selling foods products in India made in both traditional Indian and overseas food recipes to cater the domestic demand. Because of the life style changes and handsome packages leading to increase in purchase power and the food is always one of the top priority for many Indians and the demand would be northwards in the coming years.

Stocks to watch: Britannia, Nestle, Chamanlal Sethia, Coffee Day, Jubilant Foodworks, Kwality

4. Logistics: 


The Center's push to manufacturing and possibility of higher economic growth have been pushing up stocks of logistics companies. This sector includes warehousing, transportation, inventory and packaging industries. It has been growing over 16% a year on an average for the past five years. Logistics stocks rose mainly due to the boom in e-commerce. As e-commerce companies are not listed, investors took indirect exposure via logistics stocks as e-commerce relies heavily on logistics companies. Because of the lowering oil prices, the maintenance cost for these companies have decreased drastically which increases the net profit of the companies. Passing of the GST Bill can act as a trigger for the sector. Growth of e-commerce is another factor which can act as a catalyst. Policies to improve the country's infrastructure will also act as support. More trade will also help logistics companies. You will be seeing good returns from Logistic sector in the coming years.

Stocks to watch: Transport corporation of India, Allcargo, VRL Logistics, Container Corporation, Navkar Corp

5. Defense:

GOI has been showing special interest in Defense manufacturing in tune with the 'Make in India' campaign. To facilitate international foray in this field, the Government has withdrawn excise and customs duty recently. This will be a welcome move to attract OEMs such as Boeing, Airbus etc to explore the scope of investments in India. Government recently increased the FDI cap in defense to 49%. These factors are favorable to investors in Defense sector.

Stocks to watch: Bharat Electronics, L&T, Astra Microwave Products, Rolta India, Pipavav Defence

Conclusion:

India is a sub-continent and there is a huge demand domestically for the above mentioned sectors which are insulated from International disturbances. The steady domestic demand would certainly yield good results in the long term with out any doubt.

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