In the weeks ahead, the National Stock Exchange of India’s benchmark index, NIFTY, is projected to face significant resistance at higher levels. With these expectations, the focus is now on understanding which sectors may offer higher returns, despite the broader market scenario.
It is imperative to note that the NIFTY’s overall performance is usually determined by the cumulative performances of its constituent sectors. However, some sectors often outperform others in varying market climates, due to a multitude of domestic and global factors.
One sector that appears ready to outperform the broader market is the Information Technology (IT) sector. The IT sector has already been a strong performer in the last financial year. Its robustness is expected to continue, given the rising demand for digital solutions, the inevitability of technological advancements, and the favourable offshore environment. Indian IT companies are predicted to benefit from various digital initiatives driven by industries across the globe while also taking advantage of the drop in competition from Chinese technology firms.
Another promising sector is Pharmaceuticals, as the increasing demand for vaccines and healthcare services amidst the global pandemic continues to multiply. Companies in this sector that have robust research and development units and international market access are expected to ride the tide and deliver good performances. Additionally, the Rural and Agri themes could remain resilient as ongoing government-related reforms positively impact these sectors.
The Financial Services sector may also gain considerable traction despite the high resistance faced by the NIFTY. The finance sector, especially banking, is projected to benefit significantly from the economic recovery after the lethal second wave of the pandemic. Moreover, the expected increase in government spending and persistent low-interest rates can increase the propensity to borrow, thereby supporting banking and financial companies.
The FMCG sector is another space that could do well as it generally remains resilient in challenging economic conditions. With an expectation of a regular monsoon and increased rural demand, FMCG companies may see their earnings improve in the upcoming quarters. Also, the retail sector is projected to recover gradually with the easing of lockdowns across the country, which would act as a tailwind for FMCG.
Lastly, despite the auto sector’s recent troubles, it holds a lot of promise. With the global economic recovery gaining momentum and the upswing in demand for passenger vehicles and commercial vehicles, the auto sector could also put up a decent show.
All in all, while NIFTY might struggle to break through higher resistance levels, there are sectors that are likely to outperform. By identifying these spaces and selecting fundamentally strong assets, investors can continue to find profitable opportunities in the weeks ahead. However, it is always recommended that investors do their due diligence and take the advice of financial advisors before making any investment decisions.
