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Every time you drive on the road, shop at a mall, pop a pill, swipe a card, send an SMS, flip a light switch or tuck into a speciality meal, you are intersecting with the sunrise sectors of India.
That pretty much looks like all the sectors out there. The good thing about the Indian market, riding on the back of an economy that has grown by over 7 per cent in the last two years, is that you can't miss being part of the growth if you invest in the stock markets carefully. The bad part? Oh, the choice!
When a country is under construction, and domestic consumption is booming, pretty much everything on the markets is fair game.
The current volatility notwithstanding, India's big picture is bright and happy. Interest rates, crude oil prices and rising input costs are bugbears, but India remains the second fastest growing economy globally. No wonder, the government is looking at an ambitious target of over 8 per cent GDP growth over the 11th Five-Year Plan period ending in 2012.
The problem before the Indian investor is one of plenty. Of the listed 4,758 stocks on the BSE and the NSE, how do you even get close to taking a call?
Outlook Money has identified six sectors, and four companies in each sector, that should beat the GDP growth rates by a fat margin, taking you closer to that pot of gold.
Infrastructure
Good infrastructure reduces cost and improves efficiency. The result is obvious each time we turn our eyes towards the growth experience of China. Good infrastructure in the form of roads, airports, ports, power and communication has helped China emerge as one of the cheapest manufacturers of goods globally.
The Indian growth has been largely consumption led and unless a big infrastructure push comes at this stage, in terms of large investments in mega projects, everybody knows that the growth will peter out.
Estimates are that the country would require over $200 billion investment by 2012 to set up various infrastructure facilities, including $30 billion for roads, $40 billion for urban infrastructure, $10 billion for airports, $20 billion for ports among others. Needless to say, companies linked with infrastructure will see growth in sales.
Some of these will also see growth in profits. These, the ones with fat profits in the high investment zone, are the ones to pick.
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Banking & financial services
Not very long ago individual loans were not only expensive, they were difficult to get. Today, we find banks chasing potential customers to sell them loan products with an unbelievably wide range of payment options to choose from. Retail lending of banks has been growing at exponential rates ranging between 22 and 41 per cent a year since 2001-02.
Banks have moved from being makers of deposit-loan spreads -- that made it vulnerable to interest rate cycles -- to the more regular fee-based income adding to the profitability. Aggregate fee-based income of 38 banks has grown at an annual rate of 14.2 per cent during four years ended March 2005 as against a 6.9 per cent a year in fund-based income during the same period.
Of course, the bread and butter of providing basic banking services to an economy in a boom, is there.
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FMCG
The cookie has finally crumbled. After a three-year lean period, the fast-moving consumer goods sector is beginning to roll again.
These were the years during which the organised sector got lean, fit and profitable. And once you get lean and mean, the world looks like a piece of cake. After the mega acquisition of Tetley Group, the UK, by Tata Tea a few years back, other domestic players are now seen drawing global plans.
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Catch A Rising Star | ||||
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Price |
P/E |
PAT |
Change in |
|
Pharma | ||||
|
Apollo Hospitals |
436 |
36.7 |
63 |
41 |
|
Dr ReddyÕs Lab |
1,376 |
50 |
195 |
252.5 |
|
GlaxosmithKline Pharma |
1,035 |
15.8 |
354 |
41.2 |
|
Pfizer |
760 |
28.6 |
76 |
21 |
|
FMCG | ||||
|
Gillette India |
761 |
65.1 |
48 |
(12.4) |
|
Godrej Cons. Products |
663 |
30.9 |
119 |
40 |
|
ITC |
185 |
31 |
2,280 |
52.1 |
|
Marico |
500 |
29.3 |
90 |
28.2 |
|
Infrastructure | ||||
|
BHEL |
1,973 |
28.8 |
1,679 |
72.9 |
|
Hindustan Construction |
109 |
22.4 |
78 |
33.7 |
|
IVRCL Infrastructures |
231 |
27.1 |
93 |
61.2 |
|
Nagarjuna Construction |
272 |
27.1 |
102 |
77.4 |
|
Banking | ||||
|
HDFC |
1,211 |
24 |
1,239 |
21.1 |
|
ICICI Bank |
508 |
17.8 |
2,341 |
26.9 |
|
Reliance Capital |
487 |
20.2 |
538 |
382.9 |
|
State Bank Of India |
755 |
9 |
4,341 |
0.8 |
|
Technology | ||||
|
I-Flex Solutions |
1,162 |
36.9 |
245 |
23.8 |
|
Infosys Technologies |
3,190 |
36.3 |
2,401 |
29.1 |
|
Tata Consul. Services |
1,848 |
33.3 |
2,460 |
22.1 |
|
Wipro |
497 |
35.2 |
2,021 |
35.2 |
|
Retail & Entertainment | ||||
|
PVR Limited |
228 |
95.2 |
2 |
92.8 |
|
Pantaloon Retail |
1,324 |
60.2 |
59 |
86.9 |
|
ShoppersÕ Stop |
500 |
63.4 |
26 |
38.6 |
|
Trent |
686 |
40.6 |
24 |
30 |
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PAT and change in PAT is net profit after adjusting for non-recurring items and for trailing 12 months ended March 2006. Share price is as on 7 July 2006. | ||||
In fact, some of them like Tata Coffee and Godrej Consumer Products have recently announced acquisitions. Also, domestic companies are progressively developing new technologies and products that are not only meeting existing consumer needs but also creating new consumption categories.
The icing on the cake is Bharat, or rural India, that is at the beginning of an unprecedented boom. The fact that penetration of many FMCG products is still at levels that are considered low, is itself an indicator of the potent demand for such products.
Take the example of the Indian shampoo market (estimated size is Rs 1,050 crore). The per capita consumption of shampoo in India is estimated at $0.6 as against $1.1 for China and $3.7 for Thailand. Likewise, even in so-called mature categories, like toothpastes and fabric wash, India is far behind.
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Pharmaceutical & healthcare
When financial planners in India budget for future inflation, the area with over 10 per cent inflation in household budgets, is personal healthcare. When the mass-affluent Indian puts health on its priority list, the pharma companies see fat bottomlines. Move away from the mass affluent and the reason for the pharma industry being in the sun-rise sector becomes clearer.
India is an under-penetrated market for various healthcare products and services. India has the highest number of people suffering from diabetes, estimated at 31.7 million (or 18.5 per cent of the world figure) in 2000. And this is growing. If the demand is robust, the supply side is looking good with domestic companies getting ready for global competition. They are moving towards developing their own solutions in the form of patented products.
In the healthcare services segment too, a few companies have proved their ability to provide high quality healthcare facilities at globally competitive prices. This has led to higher number of foreign individuals choosing to come to India for healthcare.
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Retail & entertainment
Did you notice that the price of a cinema ticket has gone up from Rs 20-30 to as much as Rs 100 in the past 10 years? In fact, in some multiplexes they are as high as Rs 150-200. And that bag of popcorn that costs you five bucks outside needs a full 30 in the multiplexes in the new mall. What is cost to you is pure profit to the new kids on the Indian stock market -- the retail and entertainment industry.
As the urban Indian goes up the Malthusian pyramid, expect this sector to boom loudly. Companies like Pantaloon and Trent have reported topline growth of 40-60 per cent during last year. The sector should report strong growth as consumption is moving out of home into lifestyle products, events, and services.
The reasons: a large pool of young population, growing service sector and high disposable incomes. With the big boys like Reliance and the Tatas jumping in, look out for more action in mergers and acquisitions too.
OLM likes:
Technology
This is where it all began. This is where the 'India' story actually started and the story is far from over yet. Nasscom expects exports to grow to $60 billion by 2010, a compounded annual growth rate of 26.5 per cent. Not just overseas demand, there are indications of latent demand in the domestic market that is gradually converting to business for these companies.
Domestic players and also the state and central governments are recognising the role of IT for sustaining and growing their revenues. The governments of Andhra Pradesh and Maharashtra have shown their intent and have made a beginning here. On the other hand, the vast pool of skilled human resources available in the country adds to the Indian advantage.
While some argue that this advantage could diminish over the next one decade as China turns aggressive, the maturing of the industry is still quite a long way. Look out for growth rates of 20-30 per cent over the next 3-5 years at least.
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