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Sectors Likely to Provide Excellent Returns to Investors in Future

19 May 2022

According to the Asian Development Bank, the Indian economy is expected to grow by 7.5% in FY2022 and approximately by 8% in FY2023, endorsed by growing public investment in infrastructure and a pickup in private sector investment as well. Investors, motivated by the results of their investments in the last fiscal year of 2021, are prepared to devote a larger percentage of their savings to capital instruments in 2022 and are also motivated to invest in the growing industries in India.

Numerous experts speculate that by the end of the fiscal year 2022, the Indian Stock Market will also have progressed and expanded to being the fifth largest in the world, in an account of the highest market capitalization. Undoubtedly, the market will expand, with various stepping elements such as government initiatives, foreign relations, market dynamics, and so on supporting this expansion.

Read further to know more about which sector will grow in future in India and which sectors in India will flourish even more in the investing game, in the near future.

List of the Top Sectors in India that are Most Likely to Provide Excellent Returns-

1. Healthcare and Insurance Sector

In respect of revenue and employment, Healthcare is emerging as one of the most important sectors in India. An ageing population, a rising middle class, a soaring percentage of lifestyle diseases, enhanced concern for public and private partnerships, ramped up adoption and implementation of digital developments in technology, along with telemedicine, as well as growing investor interest and FDI inflows considerably over the past two decades, are all cruising the growth and flourishment of the Indian Healthcare Sector.

Hospitals, Pharmaceuticals, Diagnostics, Medical Equipment and Supplies, and Medical Insurance are the five components of the healthcare and insurance sector, according to the government. In FY2020, the average percentage of insurance premium was 3.76%, life insurance premium was 2.82%, and non-life insurance premium was 0.94%; in FY2021, the percentages rose to 4.2% for insurance premium, 3.2% for life insurance premium, and 1% for non-life insurance premium.

Since 2016, India’s healthcare industry has been enlarging at a Compound Annual Growth Rate (CAGR) of around 22%, implying that India was doing well even before the pandemic and during and after the pandemic the statistics shot through the roof. India’s healthcare industry is expected to grow at a 39% CAGR to $372 billion by the end of 2022, thanks to the country’s growing middle-class population, particularly among the younger generation, and rising financial literacy and awareness. According to the government’s FY 2021-22 budget, the government intends to amend the previous Insurance Act of 1938 to raise the permissible FDI limit from 47% to 74% as well.

Following are some of the companies worth considering in this sector:

  1. Apollo Hospitals
  2. Abbott India
  3. Fizer
  4. Divi’s Laboratories
  5. HDFC Life Insurance

2. Renewable Energy Sector

We are all aware that environmental conditions are deteriorating, and as a result, under the Paris Agreement, every country is under enormous international pressure to reduce carbon emissions. Renewable energy has emerged as a very promising sector for investors. Sales of renewable energy equipment such as solar panels are at an all-time high, and renewable electricity is becoming increasingly affordable. By the end of 2022, India wants to have 175 gigawatts of renewable energy installed.

The Ministry of Power has created the Renewable Energy Investment Promotion and Felicitation Board (REIPFB) to provide one-stop assistance to industry and investors for project development and new investment in India’s renewable energy sector. In addition, over $79 billion has been invested in renewable energy in India over the last seven years, and India’s installed renewable energy capacity has increased by over two-and-a-half times in that time, to over 141 gigawatts. Investment in India’s renewable energy sector reached $6.6 billion between April and July 2021, breaking the previous record of $6.4 billion set in FY2020-21.

Following are some of the companies worth considering in this sector in India:

  1. Reliance Power Industries
  2. Indian Energy Exchange
  3. Indraprastha Gas Ltd.
  4. Borosil Renewables
  5. Siemens

3. IT Sector

The IT Tech industry has exploded in the last two years, whether it’s in the fields of Artificial Intelligence, Data Analytics, Data Science, or Big Data. The IT industry has grown at such a breakneck pace and scale that it almost seems unreal. Around 33 Indian IT start-ups have achieved the “Unicorn” status, meaning their valuation has surpassed $1 billion. In the last two years, the Nifty Index of the IT Sector has returned a staggering 132%. With approximately 560 million internet users, India is now the second-largest online market after China which makes it clear that India is absolutely booming in this sector.

Following are some of the companies worth considering in this sector:

  1. Affle India
  2. L&T Infotech (Larsen & Toubro)
  3. TCS (Tata Consultancy Services)
  4.  Info Edge
  5. Honeywell Automation

4. Real Estate Sector

The Indian property market is trending in the right direction, and it is expected to pick up steam in the upcoming months. With strong end-user consumption and calm market conditions, the average quarterly sales volume is expected to exceed the pre-COVID year’s average quarterly sales. The unravelling of events as a consequence of Omicron is a key factor in determining the dynamism of the sales following any lockdowns. In important Real Estates markets like Pune, Hyderabad, Bangalore, Ahmedabad, and Mumbai, expansion levels have already been surpassed.

Following are some of the companies worth considering in this sector:

  1. Indiabulls Real Estate
  2. Oberoi Realty

5. Fast Moving Consumer-Goods Sector (FMCG)

In India, FMCG is the most secure sector for long-term investment. The majority of the products in this industry have been in use for over a century and will continue to be used in the future as well. HUL, Dabur, Emami, ITC, Nestle, and other FMCG companies are household names in India. For a long time, the majority of people in Indian cities and towns have been using their products.

Contrary to many other industries that go through a contraction and expansion cycle, the FMCG industry’s products are always in demand. People may not buy a new car, make new loans, or avoid investing in real estate/infrastructure during a recession or economic crisis, but because FMCG products are basic necessities, their demand will not decrease as much as in other industries. Companies based on FMCG have a lot of room to grow in every area. The FMCG industry is one of the best sectors in India for long-term investment in India if you are looking for a safe industry to invest in.

Following are some of the companies worth considering in this sector:

  1. Adani Wilmar
  2. Hindustan Unilever Ltd. (HUL)
  3. ITC Limited
  4. Nestle India
  5. Britannia Industries
  6. Marico

6. Automobile Sector

Leading global automobile players are entering India and setting up production facilities to tap one of the fastest growing economies of the world.

Also, Indian players such as Eicher Motors (Eicher Motors’ own Royal Enfield bike that has been growing in terms of sales), Maruti Suzuki India Ltd, Tata Motors Ltd, etc. are unveiling new models, facelift versions, etc. to tap the demand from the consumers.

Rising disposable income in the hands of individuals has resulted in shifting preference towards the four-wheeler segment. The growth of the automobile sector shall also translate to the growth of the automobile component sector.

Following are some of the companies worth considering in this sector:

  1. Maruti Suzuki India Ltd
  2. Eicher Motors Ltd
  3. Automotive Axles Ltd
  4. Munjal Showa Ltd
  5. Motherson Sumi Systems Ltd
  6. Endurance Technologies Ltd
  7. Jamna Auto Industries Ltd

Conclusion

It makes sense for an intelligent investor to invest in India’s growing sectors for long-term investments. However, there is an important lesson to be learned here: not every growing sector will provide incredible returns. The best approach to selecting the best sectors in India for investment is to diversify. Allocate funds to various sectors that you believe will grow, reducing risk and ensuring that you do not miss out on any booming sectors.

Disclaimer: The views expressed here are that of the author and do not reflect those of Groww.

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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