These themes may deliver big returns to investors in FY23; have a look

A couple of sectors managed to deliver handsome returns to investors in the previous financial year. Take this: the chemical sector delivered an average return of over 80 per cent, while sugar stocks soared up to 481 per cent. On the other hand, the benchmark BSE Sensex gained 18 per cent in the past 12 months till March 31, 2022.

Are you trying to spot sectors that may throw similar types of outperformers in the new financial year? Business Today spoke to a couple of market analysts to understand which are the top themes that may deliver solid returns to investors amid the ongoing uncertain market conditions.

Gaurav Dua, head-capital market strategy, Sharekhan by BNP Paribas said, “In an inflationary environment, the sector or stocks with relatively better pricing power and healthy balance sheet tends to outperform the markets. Consequently, we expect IT services, pharmaceuticals, real estate and certain commodity companies to give decent returns over the next one year.”

Of late, the retail inflation, which is measured by Consumer Price Index, came to 6.07 per cent in February 2022. The figure was over and above the Reserve Bank of India’s (RBI) threshold of 6 per cent.

Aishvarya Dadheech, fund manager, Ambit Asset Management said, “With the opening up of the economy, unlock themes should provide wealth creation opportunities to investors. Retail, consumer discretionary, QSR, IT, home building and commodities are expected to do well in the financial year 2022-23. Sectors like textiles, chemicals, and industrials should also do well with the PLI support.”

He further added that investors can also zero in on the banking and financial sector (BFSI) which has been underperforming, due to unprecedented selling by FIIs. “We see a good entry point in the BFSI space. With the momentum of the retail and corporate-led credit cycle picking up, as the economy comes back to normalcy, will be the key determinant,” Dadheech said, adding banks are over-provisioned, and have adequate capital and liquidity, with a decade-low slippage ratio.

With a gain of 11 per cent, the BSE Bankex underperformed benchmark equity indices in the financial year 2021-22. HDFC Bank, Punjab National Bank and IndusInd Bank declined 1.58 per cent, 4.37 per cent and 1.98 per cent, respectively. On the other hand, ICICI Bank, SBI, Canara Bank and Bank of Baroda surged between 25 per cent and 51 per cent during the year gone by.

Kranthi Bathini, equity strategist, WealthMills Securities said, “IT sector has potential to deliver mid-teen returns coupled with capital good, industrials and alternative energy stocks will emerge as major investment themes. The automobile can be a sector for investors can look into. Travel and tourism can be a reviving sector post-pandemic as of now. Banking and financial sector will remain centre of investment theme in the country going ahead.”

Prasanth Tapse, vice president (research), Mehta Equities added that market participants may look for investment options in the defence sector.

“India is the third-highest military spender globally after USA and China and now in the year of the war, we assume military defence spending would be increased all over the world, indicating growing demand for defence equipment. With this push, the Indian defence sector is set to grow rapidly over the next few years and benefit from the government’s ‘Atmanirbhar Bharat’ initiative,” Tapse said.

He further added that large and midsized PSUs are still available at undervalued valuations with more room to outperform the private space.  

“Investors should chase to allocate a good portion of funds in PSU space for long term wealth creation which will be led by industry valuation gap, greater dividend yields, divestment opportunities supported by long-term earning visibility,” Tapse said.