The previous year, 2021, was a rollercoaster year for the stock market, entrepreneurs, businesses, and retail investors. On the last day of 2021, both the Nifty and the Sensex closed the year in the green, bringing investors some respite. Fintech, electric vehicles, and digital all had excellent years this year, and many experts anticipated more growth levels in 2022. But the world of investments hasn’t been green lately. Apart from the COVID effect, the recent incidents, including the interest rate hike by the US federal reserve and the ongoing war between Russia and Ukraine leading to a global hike in food and oil prices, have contributed to a worldwide slump in stock prices and their returns.
Building your portfolio sensibly becomes crucial to sustaining market shocks in these volatile times. Before focusing on individual stocks, it’s important to distinguish which sectors to invest in. Sectors can be either of the 2 – Booming with high returns or cushions that absorb market volatility and stabilise the portfolio.
Here we look at the top 5 safest sectors to invest in:
1. Real Estate
Contrary to the real estate bubble that caused the global recession in 2007, the current trend in real estate suggests that unsold inventory is at an all-time low, indicating strong demand. Be it holiday homes or homestays, the demand for real estate has increased exponentially since the Covid onslaught. It is one of the few sectors that is still going strong in its return and year-on-year value. Digital marketing and online registrations, according to experts, have assisted in overcoming the barrier of sales during lockdowns. Growth levels have already been attained in significant property markets like Pune, Hyderabad, Bangalore, Ahmedabad, and Mumbai.
The pharmaceutical industry looks forward to a bright year, with many investments expected to boost the healthcare sector. The IPS (Indian Pharmaceutical Sector) is expected to grow at a rate of 9-11 per cent in 2021-22, according to rating agency ICRA, with domestic and developing markets driving growth in the coming quarters. In a sample of 21 Indian pharmaceutical companies, revenue growth in the second quarter of FY22 was low at 6.4 per cent, down from 16 per cent in the first quarter of 2021-22, according to ICRA. Even while growth in domestic and developing markets remained strong, the normalisation of the base and price pressures in the US market were the main reasons for the slowing growth pace in Q2 FY22. However, the sector is expected to boom in times to come.
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3. Renewable energy
After a year of uncertainty, India’s renewable energy sector is set to thrive in 2022, with an estimated investment of over USD 15 billion as the government concentrates on electric vehicles, solar equipment manufacturing, green hydrogen, and fulfilling the ambitious 175 GW renewable capacity target. India now has more than 150 GW of installed renewable energy generation capacity, with a goal of 175 GW by 2022. Solar power would generate 100 GW, wind power would generate 60 GW, biopower would generate 10 GW, and minor hydropower projects would generate 5 GW. The boom in electric vehicles is expected to create a lot of investments in the power sector, and thus, the renewable energy sphere looks promising for investments.
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In its drive to recapture pre-pandemic sales volume, the Indian automobile sector is looking to 2022 with a positive perspective, having created a solid foundation in 2021 despite manufacturing being delayed by a semiconductor shortage. Furthermore, the government is supporting the industry with policies like the FAME-II scheme, increased incentives for two-wheelers, and the launch of the production-linked incentive (PLI) scheme sector and PLI for advanced chemistry cells valued INR 26,000 crore and INR 18,000 crore, respectively. This support will assist the industry in surviving the pre-pandemic age and provide significant assistance as it implements sophisticated technologies. The industry is also in the transition phase, with companies moving to electric and more advanced technologies. The sector is expected to grow in times to come.
Due to the reopening of firms, educational institutions, retail outlets, and an increase in the vaccinated population, the domestic textile sector is set to create high returns after a demand dip in 2021. Sanctions against Chinese textiles have boosted Indian textile exports as well. Textile firms are also expected to spin their way to recovery in 2022, according to a CRISIL report. Government measures such as the Production Linked Incentive Plan, the creation of mega textile parks, and the extension of the Rebate of State and Central Taxes and Levies plan are also beneficial to the sector.
Apart from the mentioned sectors, several sectors look promising, such as Auto Ancillary, Healthcare, and Chemicals. Nevertheless, every investment comes with its own set of risks, and caution is often recommended when dealing with assets of any kind.
Feature Image Credits: Business Standard