Sector Overview for FY11.

1. Information technology

The information technology (IT) sector has the potential to do well as the global economic conditions improve. The scope for IT companies is good in the domestic markets. There are many large government IT projects lined up for execution in the next few years.

However, investors should track the currency rate movements in the international markets. A sharp appreciation in the rupee value against the US dollar, and other global currency rate movements can play spoilsport. One should invest more in large-cap companies that have a well diversified execution model and wider base, apart from the power to hedge against sharp currency rate movements.

Stocks To watch:
• Infosys
• TCS
• Wipro
• HCL
• Rolta
• Patni Computers

2. Auto
The automobile sector is promising as the disposable incomes are increasing and companies are launching new models in the market. Analysts believe the volume growth is expected to remain strong and will not be impacted by small hikes in the interest rates. However, auto stocks have appreciated significantly over the last few months and it is good for investors to wait for a correction to enter into these stocks.

Stocks To watch:
• Maruti
• Hero Honda
• M& M
• Tata Motors

3. Pharma:
The pharma sector looks promising in the wake of the US healthcare bill, the expanding middle income segment here, and their growing affordability and greater access to healthcare . Analysts believe the out-performance of pharma stocks is expected to continue in the medium to long terms. Pharma stocks also add diversity and defence to an investment portfolio.

Stocks To watch:
• Ranbaxy
• Sun Pharma
• Cadila Health
• Divis

4. Infrastructure
The infrastructure sector got a boost in this year's Union Budget as the finance minister has increased the allocation by almost 13 percent for road infrastructure improvement and defence projects. Also, a growth in the economy translates directly to a growth for the infrastructure sector. Investors with a longterm horizon should look at investing in these stocks.

Stocks To watch:
• Aban Offshore
• IVRCL Infra
• Reliance infra

5. Banking
Banking is another promising sector in times to come. It is expected that the credit growth will increase in future as capital expenditures increase with the economic growth. Rising rates favour domestic banks as they help them spread as loans are re-priced immediately , but only incremental deposits are re-priced at the higher rate.

Therefore, the net interest margins (NIMs) are likely to rise. Higher NIMs along with loan growth results in improved earnings in the medium to long terms. Investors with a medium to long-term horizon can accumulate bank stocks during correction phases.

Stocks To watch:
• HDFC Bank
• ICICI Bank
• SBI
• Yes Bank

Source: Economictimes, Money control.

Thanks,
Nimesh.