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Sunday, November 29, 2009

Sectoral Outlook For Long Term Investments

We have seen a good rally in past month and this month as well. We have also seen the correction happening due to developments in Dubai. Month of December seems to be quite in stock markets looking at the recent market sentiments. Also December is mainly a month of holidays in western world so FII activities will be at lower side.

Information Technolgy (IT) Sector:

Information Technology Stocks Outlook for 2010IT Sector has been out of limelight from investors for long time now. second half od year 2008 and almost entire year 2009 has witnessed slow growth for IT sector companies. There have been fewer projects coming in, lower billing rates and project losses too. This outlook is changing slowly with recovery from economic recession allover world. Projects have started coming in and so the growth. It would take say 2 - 3 quarters for full recovery and then show the growth in financial performance.

The positive developments in the global economic conditions have kept the IT stocks in a bullish mode. These stocks are expected to do well as economic conditions improve in the developed markets. However, investors should track the dollar depreciation (rupee appreciation).

The sharp appreciation of the rupee against the dollar can play spoilsport in these stocks. Investors should go for stocks of large-cap companies that have a wider base and capability to hedge against sharp currency movements.

This is the time around to buy stocks of IT sector companies for long term investments. Any correction in stock markets could be taken as such opportunity and invest in good IT stocks.

Public Sector
The stocks of public sector units (PSUs) have come into the limelight due to talks of disinvestment in these companies. The government is also talking about the merger of some public sector banks. Investors should do their homework before taking any investment decisions.

The proposed disinvestment is not going to change anything from the control perspective of these PSUs and the money collected as part of this disinvestment will go mostly to the government.

Real Estate and Infrastructure Sector

Real estate and infrastructure stocks outlook for 2010The situation has definitely improved for companies in the real estate sector.

However, the stocks in this sector have shown high volatility due to their being sensitive to macroeconomic data on the global and domestic fronts.

There are many factors that directly or indirectly influence the movements in stocks of this sector.

Some of the main factors include data related to consumer confidence, raw material prices, job market data, interest rate data etc.

Investors with a longterm horizon can look at accumulating real estate stocks in correction phases.


TELECOM Sector

Telecom sector stocks outlook for 2010The entry of new global players into the domestic telecom space has triggered a new tariff war.

The pricing pressure is quite visible in the recent results of leading telecom companies.

Although this is one of the fastest-growing mobile markets in the world with a huge potential for growth, investors should take a cautious approach on fresh positions in telecom stocks till the pricing war gets stabilised.

Investors with a longterm horizon and having telecom stocks in their portfolio should hold on to their positions, and look at averaging out at lower levels.


Banking & Financial Sector

Banking and financial sector stocks outlook for 2010Stocks in the banking sector have been through a good rally during the last few weeks. The good results declared by large global banks have brought investor attention back to this sector.

The demand for retail loans picked up during the festival season. Those invested in bank stocks at lower levels can book partial profits.

Further, this sector might have to go through rough patch as interest rate hikes seem to be around the corner.


Auto Sector

Auto sector stocks outlook for 2010The valuations in the auto sector stocks have gone up significantly during the last couple of quarters.

Those invested in auto stocks at lower levels can book partial profits.

However, those looking at taking fresh positions should be careful because the valuations of auto stocks are already stretched.

The growth in sales could flatten going forward , and interest rates may also go up in the medium term.

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