Investing in the stock market is not a get-rich-quickly proposition as they say, particularly since there are tons of risks involved although the rewards are likely to be sweeter as well. However, there are some types of stocks which may make investors rich in India as they have done over the years. Bear in mind that this is a varying list and may change from time to time, depending on which business sector is performing well, Government policies, new orders and several other parameters.
What does the last decade report say?
For instance, if the last decade is taken into account, reports state that sectors like pharmaceuticals, processed food, consumer products, plastic products, pesticides, NBFCs (non-banking finance companies), chemicals and consumer durables along with footwear, offered several multi-bagger stocks across Dalal Street. There were stocks like Avanti Feeds which witnessed rallies up to a whopping 34,200% as of December 30, 2019 (Rs. 569.30) as compared to 31st December, 2009 (Rs. 1.66). If someone had invested a sum of Rs. 1 lakh on Avanti Feeds’ stock back then, it would have turned into an unbelievable Rs. 3.43 crore at current rates with annual CAGR (compounded annual growth rate) touching 79%.
Making a similar investment in Caplin Point Laboratories, a leading pharmaceuticals company, would have yielded a whopping Rs. 1.85 crore today as per estimates. Other top multi-baggers over the last decade include Bajaj Finance which witnessed an astronomical 13,131% of growth and Safari Industries with 8,625% of growth. Other stars in this rare galaxy included Ajanta Pharma with 6,004% and Relaxo Footwear with 6,285% of growth. Symphony grew by 6,185% while Tasty Bite saw 4,897% of growth in turn. Shares of Abbott India, Hester Biosciences, Medicamen Biotech, Granules India and Natco Pharma have also jumped up by a whopping 1,000% over the last decade. Even some of the best automobile stocks in India have a substantial past record in which one can think of investing.
Stocks that may do extremely well for you today
Pharmaceutical and healthcare stocks remain hot favorites, particularly amidst the COVID-19 outbreak. Additionally, internet-based sectors and companies also have ample potential for growth in the future. Some of the other stars of the decade ending on the 30th of December, 2019, include Titan where share prices jumped up overall by 1,580% and Page Industries which had growth of 2,610% in share prices. You should be considering investments in these sectors as well:
Small and mid-cap stocks–
The small and mid-cap stocks have mostly performed below capacity over the last 3-4 years. However, from 2020 onwards, investors are expected to switch from leading marquee large cap brands towards seeking greater alpha and value in the small and mid cap stocks. Hence, they will be scouting for high-quality stocks in these categories and will remain invested with a minimum time-frame of 1 year.
The Indian economy, while having bottomed out lately, is expected to witness a recovery in the financial sector. Public sector banking entities are expected to perform well with the NPA (non-performing asset) fire subsiding to a large extent, more recoveries via the NCLT system and consolidation of multiple PSU banking players as well. You may consider investing in stocks of bigger NBFC companies with stellar reputations, particularly those who have kept NIMs absolutely intact and will grow with lower competition around after the market churn.
Construction & Industrials–
With major public and private spending expected on infrastructural projects, companies in this space may deliver superior returns in the future. Investors should opt for entities with stellar track records of completing projects and healthy order book volumes.
This sector will naturally benefit directly from huge infrastructure spending lined up by the Government to revive the economy. Companies involved in this sector will be posting healthy growth in earnings and improving returns will naturally be good for investors. Choose good mid-cap companies in this space.
Metals may keep doing well, particularly with the de-escalation of the trade war between China and the United States and improved projections for developing and developed economies. Companies in this segment may gain handsomely in the near future.
Healthcare & Pharma–
Pharma companies and healthcare entities may be the defining players of 2020 in terms of earnings, increases in stock prices and higher demand. With the COVID-19 outbreak and increased public and private spending on healthcare, this category should deliver handsome returns for investors in the future.
Speciality companies in the field of chemicals who are market leaders in their segments, will benefit from an economic revival down the line. This includes agro-chemical companies since the Government will push more on alleviation of agrarian issues.
Oil & Gas–
This is one sector that always recovers and growth in earnings should be decent for FY 2020-21 as per estimates. Distribution companies will perform better as per the expectations of analysts with higher earnings and revenue visibility.
These are some of the sectors where you may find the next big multibaggers of the coming decade. You should clearly analyze the company, its sector and the management of the company before you invest. Do not just get into stock trading to gain money or think of increasing your wealth quickly. Invest with long-term gains goals in a company or business along with people that you believe in and consider future growth prospects as well. This will help you accumulate wealth in a steady manner for the future as a result of being able to predict high-growth sectors accordingly.
Do your homework, research on the top industry sectors, flourishing stocks and also look at current market trends. A little research and analysis will go a long way towards helping you take the correct decisions while making stock investments. If required, you can consult your financial advisor or take professional help for deciding on your next course of action. The Indian economy has already started sprouting green shoots amidst the ongoing COVID-19 pandemic. Going forward, by the final quarter of FY 2020-21, things are expected to look up for a variety of business sectors. As an investor, you have to be patient, discerning and be in it for the long haul.