{"id":3957,"date":"2020-02-29T17:56:34","date_gmt":"2020-02-29T12:26:34","guid":{"rendered":"http:\/\/capitalante.com\/?p=3957"},"modified":"2020-06-14T11:21:52","modified_gmt":"2020-06-14T05:51:52","slug":"best-sectors-to-invest-in-india-for-long-term","status":"publish","type":"post","link":"https:\/\/capitalante.com\/best-sectors-to-invest-in-india-for-long-term\/","title":{"rendered":"Top 10 best sectors to invest in India for long term"},"content":{"rendered":"
While discussing how you can diversify your portfolio, we have analyzed the sectors in which you may make an investment. You need to analyze the sectors which may enable a satisfactory return in the long term. In order to make money in the stock market in the long run, you need to invest your money in the growing sectors or industry. Here we will analyze the five competitive factors that shape every industry and help to determine the weaknesses and strengths of any specific industry. In this column, we will make use of Porter\u2019s five forces for analysis of strength and weakness of any specific sector or industry and guide you to choose which are the top 10 best sectors to invest in India for long term.<\/span><\/p>\n There are many sectors across the world. They have different revenue models, i.e. how the company makes money, profitability, marketing strategy, etc. According to Porter, there are five undeniable forces that play a vital role in every market and industry in the world and they are<\/span><\/p>\n In every industry or sector, there is a chance of competition or it is quite inevitable. Every business faces competition from other rivals. It is a matter of concern for a company or business person how strong the competitors are. You as an investor should check and verify the ability of the peer companies competing in the same industry. You need to check out the capital structure, business model, the quality of products or services, etc. which the companies sell. In some businesses, competition is at an extreme level. In that situation, companies have to offer products or services at a discounted price. On the other hand, if a company has no rival or business is competition-free, the company can enjoy a monopoly and get success easily.<\/span><\/p>\n Companies run the business by buying some raw materials and then produce some products or finished goods or items and then sell them to the consumers. It means the company buys raw material or any technology or any service or anything from a supplier. There may be many suppliers. Now, you should check whether the suppliers can increase the price of the raw materials. This will definitely affect the profit margin of the respective company. Now, when the prices of the raw material or any other equipment are costlier from one supplier, companies usually buy the required items from different suppliers. Thus the company may shift from one supplier to another in any emergency situation. If the number of suppliers is low the companies will be more dependent on them. The suppliers are in a stronger position. This may impact the company\u2019s profit.<\/span><\/p>\n The earning comes for the products and services offered or sold by the companies. You should check how many buyers the company has, especially the regular ones. You can figure out the prices offered by the company you want to invest in comparison to the rival companies.\u00a0 The number of customers is obviously the power of the respective company. You need to ensure that whether the company gives quality services at an attractive rate so that the customers do not move to the rivals.<\/span><\/p>\n The products and services of any company always face the threat of substitution. A new rival company may substitute the products of any company. We can take the example of Chinese products from electronic items to toys. Chinese products have substituted\u00a0Indian products. Although they are harmful to our body, because of the cheap price of the products people buy them. This kind of substitution is possible in every field. Every company remains under threat that any other rival may produce the same products at a cheaper price to attract customers. While making an investment in a company, you should see what the company produces and if there is any possibility of replacement of the same items by any other company.<\/span><\/p>\n If you are dealing in a business that can easily be penetrated, many competitors may arise affecting your business. A business holder should be aware of the newcomers in the sector. For example, a restaurant is an easy business. So, it always faces threats of new establishments by newcomers. On the other hand, it is quite difficult to set up an Insurance company. The insurance company requires huge capital and a broader infrastructure which would satisfy rigid and stringent government regulations. So, the position of any company in any business may be affected when more and more competitors enter the same business. When you choose a sector you can see whether the sector faces the threat of new entry.<\/span><\/p>\n Now, we will make use of this theory to analyze the industry and find an investment opportunity in the sectors for a long horizon. If you want to invest in any sector or stock you need to consider the future potential of the sector, competitive advantage, whether the demand of the sectors or products will remain constant in the near future, the growth possibility, if the industry or sector has any strong entry barrier, etc. before making an investment. You need to consider the above-motioned points.<\/span><\/p>\n We can take examples of mining and utility products. They have delivered better returns in the recent past, but now they are not able to deliver a satisfactory return and their future possibility is also less. So, as a smart investor, you may choose the sectors which have an untapped market opportunity and has a strong growth opportunity in the near future. We have discussed some sectors which have the following entry barriers namely,<\/span><\/p>\n The banking sector is the base of the Indian stock exchanges. The banking sector comprises of govt. and private banks, many other financial institutions, etc. Among all the banks 9 banks open their stocks for the public. There are 9 Banking Stocks in the benchmark index NIFTY 50. These stocks altogether occupy 18.56% to NIFTY 50. Govt. banks have been approved of a huge amount of loan of Rs. 80,000 crores by the central govt. of India. This fund is to be utilized as a recapitalization for the banks. This fund is expected to manage\u00a0bad loans.<\/span><\/p>\n According to Indian experts, the revival of our economy is not possible without the contribution of banking stocks. Keeping this in mind, investors have extensively invested in the banking sector in the last 5 years. As far as mutual funds are concerned, the banking sector has received maximum investments followed by auto and IT sectors.<\/span><\/p>\n Today, every bank\u2019s stock is considered bullish (will increase in price in the future) by many experts, and it is recommended that you buy and hold banking stocks as long as possible. The Banking industry will continue its immense growth owing to the following factors,<\/span><\/p>\n State Bank of India, Indian Bank, Punjab National Bank, are the well-known PSU Banks and HDFC Bank, Yes Bank, Kotak Mahindra Bank are some Private Banks of the Banking sector.<\/span><\/p><\/blockquote>\n The modern age is called the age of technology. Everything is being now operated by technology. Information technology is the most growing sector of allowing to technological advancement, economic needs, and Government initiatives like Digital India, etc. Day by day human life is getting dependent on this sector. There is a great demand for information technology and this sector has a vast area to grow. Whatever the companies operating in this sector has performed well and delivered robust performance year on year and will continue the pace in the near future. Obviously, investors are getting profited also. The Information Technology industry will continue its immense growth owing to the following factors,<\/span><\/p>\n There are some big guns in this sector in India like TCS, Infosys, Wipro, Tech Mahindra, etc. Apart from them, there are also some growing players like eClerx Technology, 8K miles soft, etc. in which an investor may invest among the midcap stocks for better returns.<\/span><\/p><\/blockquote>\n FMCG refers to those items or products which are utilized by anyway for human living on day to day basis. Actually, FMCG includes all the basic items or products necessary required for living like various food items like rice, wheat, vegetables, oils, beverages, packaged food items, cosmetics. All the things are required for everyday living and will be required in the future also. The demand for these products will not decrease. So, companies producing these products or are in operating with their business are doing good business. These companies will profit in the future also. <\/span><\/p>\n In a recession or due to any emergency situation people may not buy automobiles items, may not invest in real estate, may not withdraw loans to buy luxurious items, but will not stop using the above-mentioned products. So, the demand for FMCGs is not going to decline in any situation. Usually, FMCG stocks are the safest bets. If you are a defensive investor, you can invest in this sector. The FMCG sector will continue its immense growth owing to the following factors,<\/span><\/p>\n HUL, Dabur, ITC, Emami, Nestle, Britannia are the well-known brands of the FMCG sector.<\/span><\/p><\/blockquote>\n NBFCs provide easy loans with an affordable interest rate. With this loan, a person can buy a house, car, Smartphone, computer, laptops and many other consumer durables. There are companies that provide loans to buy the above-mentioned items. There are several companies that give housing loans only. They are usually called housing finance companies. <\/span><\/p>\n Whatever, in these days the nonbanking financial institutions operate in small cities besides big cities. They have made access to the rural areas also. If you want to buy a Smartphone, you can get an easy loan on EMI options at affordable interest rates from the retail shop from where you buy the Smartphone. This loan is provided by actually any NBFC. Anyone can withdraw loans like this. NBFCs have now access to almost everyone. NBFCs provide easy loans even at 0% interest rates on some occasions. People prefer NBFCs in comparison to bank loans.<\/span><\/p>\n Bajaj Finance, Bajaj Finserv, Capital First are the well-known brands among the companies who are Non-Banking Financial institutions. Owing to the housing for all projects initiated by the central government, many housing finance companies such as LIC Housing Finance, PNB Housing Finance will get a boost.<\/span><\/p><\/blockquote>\n This is one of the greatest sectors to invest in. It is still growing and this growth will continue in the near future on the wings of economic development, continuous product innovation, technological advancement i.e. electric vehicle, alternative fuel such as shell gas, CNG and use of renewable sources of energy such as solar power, wind energy and increase in demand of luxury commercial vehicles in developing countries like India. The automobile industry will show immense growth owing to the following factors.<\/span><\/p>\n Eicher Motors, Maruti Suzuki, Mahindra & Mahindra, Minda Industries, Motherson Sumi, Exide Industries are the well-known brands of the Automobile sector.<\/span><\/p><\/blockquote>\nPoints to consider while choosing the best sectors to invest in India<\/span><\/strong><\/span><\/h6>\n
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Competition in the market or industry<\/span><\/strong><\/span><\/h6>\n
Supplier power<\/span><\/strong><\/span><\/h6>\n
Buyer power<\/span><\/strong><\/span><\/h6>\n
Threats of substitution<\/span><\/strong><\/h6>\n
The threat of new entry<\/span><\/strong><\/span><\/h6>\n
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Points to consider<\/span><\/strong><\/span><\/h6>\n
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Top 10 Best Sectors to Invest in India<\/span><\/strong><\/span><\/h2>\n
Banking Sector<\/span><\/strong><\/span><\/h6>\n
Why the Banking Sector<\/span><\/strong><\/span><\/h6>\n
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Information Technology<\/span><\/strong><\/span><\/h6>\n
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Fast Moving Consumer Goods (FMCG)<\/span><\/strong><\/h6>\n
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Non-banking Financial Institutions<\/span><\/strong><\/span><\/h6>\n
Points to consider,<\/span><\/strong><\/span><\/h6>\n
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Automobile industry<\/span><\/strong><\/span><\/h6>\n
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