7 Sectors for Long Term Investment

1. IT (Information Technology):

The revival of USA economy is good news for IT sector. Secondly, the devaluation of INR is
another good news. Lastly, the focus of Govt of India on Digital India will benefit IT
companies which will shift their focus to Digital India. It will be easy for midcap IT
companies to shift swiftly compared to large cap companies like Infosys. Considering these
factors midcap IT space is looking quite good for Long Term Investment. Though the
analysts are bullish on Infosys but personally i like MindTree in IT space. It has delivered a
quite strong result in last quarter. I believe in holding fewer stocks for Long Term
Investment, therefore, i have shortlisted only 1 stock. IT is considered as a defensive sector,
therefore, it is under low risk from Long-Term Investment perspective. Currency fluctuation
has a major impact on this sector. In a long run, the Indian Currency will remain stable
therefore there are No Short-term threats to IT sector.

2. Pharma (Pharmaceuticals)

Recently Govt of India has taken certain steps to promote pharma sector. Like IT, Pharma
also gains from the devaluation of INR. Most of the Indian Pharma companies invest heavily
on R&D and it yields good results. I believe that future growth of Pharma company can be
judged based on number of Pending ANDA approvals from US Food and Drug
Administration. In midcap pharma space, leading the list is Aurobindo Pharma with approx
180 pending approvals. The second in the list is Glenmark Pharma with 63 pending ANDA
approvals. Here analysts are BULLISH on both Aurobindo Pharma and Glenmark Pharma. I
selected Glenmark Pharma for Long Term Investment. The key reason is that Glenmark
Pharma is fundamentally stronger than Aurobindo Pharma. EPS of Glenmark Pharma is Rs
43.90 compared to Rs 26.18 of Aurobindo. P/E of Glenmark is 23.48 compared to 27.26 of
Aurobindo. Lastly, Glenmark Pharma is included in MSCI Emerging Markets Index,
therefore, will get additional investments of $130 Mn.

3. Housing Finance Companies / NBFC:

My next bet is on Housing Finance Companies for Long Term Investment. The banks are in
my negative list as i mentioned in the previous post. The reason for selection of Housing
Finance Company is that their balance sheets are cleaner compared to banks. According to
recent reports, the NPA’s of banks are much higher than what is being reported. It can be as
high as 13%. On the other hand, NPA’s of most of the Housing Finance Companies are less
than 1% which means they are better managed. For Long Term Investment, i considered
IndiaBulls Housing Finance and DHFL. Most of the analysts are more Bullish on these 2
HFC’s along with LIC Housing Finance. In my analysis, i found IndiaBulls Housing Finance
more promising and growth potential is HIGH. Another reason was the inclusion of
IndiaBulls Housing Finance in MSCI ACWI Value Index. It brings additional funds of
approx $15 Mn to the stock.

4. Auto – 4 Wheeler

As i mentioned in my previous post that broad demand of 2 Wheeler is dependent on rural

demand which is cyclical. The implementation of OROP (One Rank One Pension) and 7th
Pay Commission will increase urban consumption. Therefore, biggest beneficiary will be
Maruti Suzuki and it is best fit for Long Term Investment. I ignored commercial vehicles and
2 Wheeler companies in this section due to stated reasons. After 6th Pay commission
implementation, the volume of Maruti Suzuki jumped 10 times. The similar performance is
expected this time also. Moreover, Maruti Suzuki is suitable for Long Term Investment due
to impending increase in FII limit to 40% and possible inclusion in MSCI India index. In auto
segment, i ignored midcap for Long Term Investment as the scale is key in Auto Segment.
The decline in commodity prices of steel and aluminum will decrease the cost of 4 wheeler
thus will increase the margin of auto companies like Maruti Suzuki. Therefore, Auto is proxy
play for Metal space also.

5. Infrastructure:

Normally the Capital Goods companies are considered under Infrastructure. I would like to
add that i have not included Capital Goods companies like L&T and BHEL for my analysis.
Sometime back experts were bullish on these stocks for Long Term Investment. These stocks
proved that it was the wrong bet. In infrastructure, my bet is on Adani Ports. 3 key reasons
are

(a) The nearest port from North India are ports in Gujarat. With good road connectivity and
push on Make In India i.e. focus on exports. The Gujarat ports will gain immensely.
Obviously, Adani Ports will be the biggest beneficiary and is a strong bet for Long Term
Investment.

(b) Shortly, Adani Ports will be included in NIFTY replacing NMDC. It will bring ETF
money in the proportion of weightage in NIFTY. Govt is investing EPFO money in NIFTY
through ETF route therefore Adani Port will see additional fund flow in coming months. It’s
a safe bet for Long Term Investment.

(c) In ease of doing business, Gujarat is No 1 state in India. Therefore, it will help Adani
Ports as Gujarat will attract more investment.

6. FMCG – Urban Consumption

FMCG is defensive sector and it is always good to have an FMCG stock for Long Term
Investment. As i avoided FMCG stock dependent on rural demand. HUL fits in this criterion.
At the same time, i am betting on FMCG stock dependent on urban consumption for Long
Term Investment. I have shortlisted 2 stocks i.e. Godrej Consumer Products and ITC. I have
not finalized the one for Long Term Investment. I am in final stages of analysis and will share
my choice with readers.

7. Logistics

With the booming e-commerce and focus on Make in India. Logistics will be underdog sector
in my opinion. There are very few large players in this sector and most of the companies are
small players. This sector is currently on my watch-list and is on the bottom of my chart. I
have not finalized any stock for long term investment. This sector has its own challenges, but
i will go for a good pick in this sector for Long Term Investment. You can expect good
returns with a time horizon of 5 years.