Despite the recent market volatility, investors can consider many sectors for investment, which can generate good return on their capital. The present article deals with some these sectors which look attractive in the current market environment.

The recent guidance of NASSCOM says that India’s software services industry is likely to grow as much as 9% in fiscal 2019 as most of the companies have strengthened their position in the segment of automation and are also able to adapt to the rapid onset of digital technologies. The association also expects the sales to rise 7 to 9% in constant currency terms in the fiscal year ending March 2019. Meanwhile, in the current financial year, revenue from the industry will rise 7.8% to $167 billion. It also stated that there is still some turbulence in the space and it is not clear how some of the known uncertainties will play out. But, it estimates that FY 2019 is likely to be a better year as compared to this fiscal. Even the weakness in rupee against dollar over last few weeks is also likely to add to their top line numbers. Hence, select large cap and midcap IT stocks have much more potential to outperform in the coming quarters.

Similarly, the managements of most of the consumer goods companies are positive for the near-term and consumption as a theme may be looked at by participants in the coming months. Also, with GST getting smoother, the organized consumer companies are likely to be benefitted by the increase in market share due to loss of  unorganized players.

Also, selective pharma companies who managed to survive and grow in the recent turmoil may also be looked at for addition to the portfolios.

Stable real estate prices across India, implementation of RERA act, subsidy by the government to promote affordable housing have boosted buyers’ confidence in the real estate sector and also increased the number of houses sold. Under this theme, one may look at the affordable housing finance focused finance companies, cement, home improvement, and home appliances firms.

Infrastructure companies which don’t have stretched balance sheet can also be considered after the government put more thrust on infrastructure development. 

What’s the action to be taken?

The government bond prices are on a steady decline and drifting lower over last few days amid lack of appetite for bonds. Market participants are also focusing on trajectory of the rupee and crude oil pricing for getting further cues in bond yields. Over last few days, fixed income yields have been more than 8.5%, and are more attractive than what they were one year back. In this perspective, fixed income has become more attractive. Meanwhile, equity prices have gone up sharply with earnings not catching up and hence are poised for correction.

For mutual fund investors, from a short-term perspective, one may rebalance his allocation by lowering weights in midcaps and shift amounts towards large cap and debt funds. However, from a long term perspective, stick to equity funds and consider debt funds for short-term needs. For investors who don’t have enough time to track their portfolio, may choose balanced funds or dynamic funds. These dynamic funds calibrate exposure based on the cycles to reduce volatility in the portfolio. These also provide you an automatic hedge because they re-balance between equity and debt and they re-balance this around valuation points depending upon the interest rates and valuations.

However, SIP investors should always expect that markets will be volatile, and hence should accumulate more during corrective phase. So, investors doing SIP need not worry about the recent market volatility.