Modi 2.0 – Top 5 Sectors to Invest

Best Sectors To Invest in India

In this article, we will see which are the top 5 sectors that are going to get the focus from Modi 2.0 government. After the current Lok Sabha election results some of the sectors will see movements and developments in them. This government has their complete focus on the economic challenges.

Most probably the government won’t bring any structural changes. In coming times, the government might take calls related to infrastructure and economic development.

Modi 2.0 – Top 5 Sectors

The Modi 2.0 – Top 5 Sectors that can catch the limelight in the near future are: –

1. Banking

• Both PSU as well as Private banks are included here. Private banks are better options than public banks as public banks can have a negative impact because of the government involvement. Thus, long term investments in private banks can be a safe option.
• There were a lot of problems in Yes Bank, IL&FS crisis. Hence, even in private sector banks should be chosen wisely after studying them and analysing the various aspects related to it.
• The credit offtake in India, that is the loans given out in India are 70% from the PSU banks. Thus here, the private banks have the opportunity to increase their credit offtake. This is possible as the government is focused on merger of PSU banks, the PSU banks will be busy with issues such as unions, employee opposition, etc and here banks will not be able to focus on their business which will in turn can be picked up by the private banks.
• In the corporate/wholesale banking segment SBI, ICIC and IndusInd banks can be great investment options. Similarly, HDFC, Kotak Mahindra and IDFC First banks can be attractive investments in the retail banking segment.
• Therefore, bank sector looks very bullish at this point.

2. Infrastructure

• The new government is expected to continue with its infrastructure thrust. Many articles and analysts are speculating in which sector will the majority investments happen, and the speculation reveals Infrastructure as the that sector. This is a very debt-ridden kind off sector. Thus, investments in a direct involved infrastructure company may not be advisable.
• Companies or sub sectors which support the automobile sector indirectly are called as Auto-ancillaries. Similarly, there are some companies & sub-sectors which are indirectly involved in the infrastructure sector. These companies & sub-sectors can be called as Infra-ancillaries companies.
• And one such sub-sector is Cement sector. Cement sector can see huge increase in their order book. The government scheme called ‘Housing For All’ is to provide everyone with a house till 2021. Thus, this will be very beneficial to the cement sector.
• In the cement sector, Ultratech Cement and ACC are 2 very good companies out of which the former seems to be having premium valuation and the latter is fairly valued.

3. Insurance

• In the last term, the government gave a lot of importance to financial inclusion. Thus, in the current term, the government can give focus to an allied sector of Finance, the insurance sector.
• Thus, Insurance sector too is very bullish in this situation the major reason behind it being under-penetration. There is very poor penetration in this sector. Not many people have insured themselves adequately. As the awareness about insurance will increase in India this sector will start picking up pace and may even soon see double digit growths.
• The sector includes both General as well as Life Insurance. ICICI Lombard General Insurance & HDFC Life Insurance are looking very good investment options. We have analyzed both the stocks – ICICI Lombard General Insurance & HDFC Life Insurance, in our detailed stock analysis subscription.

• This does not means that the other companies of the PSU insurance companies are bad, but the growth and value for investment these 2 companies may give is better.

4. Real Estate Allied Sectors : Paint & Housing FInance Companies

A. Paint Industry :

• There is a phenomenal growth in the housing sector front with rapid urbanization and easy availability of home loans, which have become the prime drivers of growth in the decorative paint segment.
• Whereas, Industrial market accounts for general industrial paints, automotive coatings, powder coatings, OEM paints and others.
• We have done a comprehensive analysis of paint industry in India.

B. Housing Finance Companies :

• Housing Finance companies can also benefit from the ‘Housing For All’ scheme launched by the government.
• HDFC Ltd is an excellent housing finance company. Their business model is also very good.

5. Automobile

• This sector is going through a lot of troubles and changes right now.
• The strong government is not the direct reason for this sector to perform good in the coming times, but the cyclicality of this industry. After the election results, the following couple of years are very glorious for this sector. Automobile is a cyclical sector and has a cycle of 4-5 years. The sector is at the bottom right now and from this point forward it may only grow.
• Electric Vehicles are the future of Automobile sector. But as they are not yet developed fully in the developed market it will be time before it comes to the Indian market. Tata Motors, Ashok Leyland & Maruti are good investment options.

Notes: –

• The numbers that are used are approximate and have been rounded for presentation purposes.
• We are also not suggesting anyone to immediately go and buy these stocks or invest in the stock markets.
• Only an analysis has been presented here. No judgments or final statements are being made here.