Happy Independence Day: Two sectors on D-Street getting freedom from bears after 14 years

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We are celebrating our 75th Independence Day hence the majority of the population has been born in independent India. Our country got freedom 75 years ago but if we talk about financial freedom then we have miles to go. On one side, many people die with lots of money in their bank account and as per the data, Rs 18,830 crore of unclaimed money lies in Indian banks as of 2019 while on another side lots of people fail to get basic amenities due to lack of money. The main reason behind this problem is financial illiteracy. In India, 75% population is literate but only 24% of the adult population is financially literate. There is a financial imbalance because either we are over-saving or we are overspending.

Financial freedom and asset classes

There is a quote by Robert Kiyosaki “Financial freedom is available to all those who learn about it and work for it.” Yes, there is a lot of work that our country needs to do towards financial literacy.

Financial literacy and freedom consist of lots of areas like saving, insurance, tax, real estate, debt, mutual fund, etc but being an equity market analyst, I will talk about only equity investing, and equity investing is a critical ingredient in the recipe of financial freedom. In the long run, the equity market always tends to outperform which helps you to meet your long-term and major financial goals and to achieve financial freedom.

Indian economy got its independence in 1991 and since then the Indian stock market is rewarding investors with handsome returns. Our economy has reached a stage to take off and it may set an example to the world by its exponential growth. The global situation is also favouring us as we have a leading position in the digital economy. The world is also looking at India as an alternative to China as a manufacturing hub. Recently, former Australian PM Tony Abbott said that the answer to every question about China is India. Recent actions by the Chinese government have dented the sentiment of foreign investors about China and they may shift some of their investment in India where policies are comparatively stable.

If the Indian economy is going to be prosperous then investors in the Indian economy will also be prosperous. I am happy that investment culture is changing in India, especially in the last one and half years where we have seen that youth are getting attracted towards equity investment. But it should be stable and the ratio should continue to increase because most of them didn’t see a bear cycle and are not aware of the risk factors.

Where to invest?

The bigger question is where to invest in the equity market. Those who don’t have much knowledge about equity must buy SIP in the equity market because SIP is the eighth wonder of the financial world. Those who want invest directly should have a well-diversified portfolio with the guidance of an expert or backed by proper research. If I talk about which sector or stocks may outperform in the next 3-5 years then the capital goods, infrastructure, and real estate sectors are looking very lucrative.

Infrastructure and capital good sectors are coming out of 14 years of exile or we can say that they are getting freedom from 14 years of slavery of bears. Covid-19 led to sharp fiscal expansion across the world as governments of most of the country pumped lots of money into the economy through various measures especially in the infrastructure sector. In India as well, after a long time, we have seen such massive infrastructure spending and capital expenditure by the government will also boost private capital expenditure and FDI inflows.

Technically, there is a breakout of 14 years of consolidation in the BSE Capital good index and Nifty Infra index therefore we are expecting a big bull run in coming years in these spaces. If we talk about stocks then L&T, Action Construction, Carborundum Universal, Siemens, Cummins India, KNR Construction and PNC Infra are our top picks from capital goods and infra space.

Similarly, the real estate sector is also showing signs of revival where government measures and lower interest rates together are acting as a catalyst for a turnaround in this sector. Technically, the Nifty Realty index is witnessing a breakout of 10 years of consolidation and we can expect a good upside in most of the real estate stocks in coming years. If we talk about stocks then Sobha, Oberoi Realty, Prestige Estate, and Godrej properties are direct players while Polycab, Kajaria Ceramics, HSIL, Asian Paints, Pidilite are indirect players which may outperform.

(The writer is head of research at Swastika Investmart; views expressed are personal)