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Some Interesting Sectors to Invest in

As the economy shows signs of strong recovery, it may be a good time for investors to consider investing in strong performers in sectors such as chemicals and manufacturing. These industries have shown good traction and the expectations for a strong economic recovery in the future are high. While it may not be accurate to describe this as “betting,” it is a good opportunity for investors to take a long-term position in well-performing companies in these sectors.

The cement sector, while benefiting from expected growth in infrastructure and real estate, also has headwinds and tailwinds to consider. Most cement stocks are still down 20-40% from their peaks, and it is important for investors to carefully analyze the sector’s trends before making any investments. While the long-term outlook for infrastructure in India is positive, it is necessary to closely examine the sector’s current challenges and opportunities. Currently, cost pressures are decreasing due to declining raw material costs, such as pet-coke and crude oil. However, the trend in these commodity prices is linked to global macros and could change quickly. Additionally, the second quarter is traditionally a weak period for the cement sector, and these trends have impacted stock prices. It is important for investors to consider the potential impacts of these and other factors on their investments in the cement sector.

The IT sector is facing challenges in terms of wage pressure and earning growth, with higher attrition rates among the major companies. This may make investors cautious about investing in these larger companies. However, smaller and specialized companies in areas such as cloud, the Internet of Things, and testing services may be less vulnerable to budget cuts and could still perform well. These companies may be able to benefit from their niche specializations and agility in a challenging market. It is important for investors to carefully consider the potential risks and opportunities in the IT sector before making any decisions. Factors to consider may include the long-term outlook for technology, the impact of wage pressure and earning growth on individual companies, and the potential vulnerabilities of different types of IT companies to budget cuts and other challenges. By carefully analyzing these and other factors, investors can make informed decisions about their investments in the IT sector.

Equity Market Risks

However, it is important for investors to recognize that there are still potential risks to consider. The risk-on sentiment, which refers to the willingness of investors to take on risky assets, has reduced somewhat due to a mix of negative and positive developments. The markets have improved over the past quarter and given investors reasons to be optimistic. However, the Ukraine-Russia conflict has not been fully resolved and could potentially escalate, while concerns about commodity prices and interest rates continue to influence investor sentiment.

Inflation remains a concern and there are fears that negative surprises could have a global impact. The Federal Reserve’s interest rates are already factored into market expectations, but it is possible that the expectation of moderate rate hikes may not materialize as inflation remains high. The ongoing COVID-19 pandemic also presents risks, as a fresh wave with a deadlier impact could derail progress.

Market Outlook

Despite these risks, the long-term outlook for the Indian market remains strong. The advice to “stay invested” reflects the belief that intermittent market slides, while potentially occurring due to global macro scenarios, will not diminish the overall strength of the market. This advice is supported by the fact that India continues to be an attractive investment destination with relatively strong macroeconomic indicators. Valuations have also come down to more attractive levels, which may make the market more appealing to investors. Additionally, faith in equities as an asset class remains strong among Indian investors, with many continuing to invest through systematic investment plans (SIPs). These SIPs can act as a support level for the market, helping to mitigate potential declines.

Ram Kalyan Medury, Founder & CEO Jama Wealth shared his views on India’s Long Economic Story here. Some of the inputs here were published in Money Control