Sectors to
look at in
2021

The year 2020 has been a rollercoaster ride. It has had its ups, but also it downs. For long stretches, the markets were in a tizzy, suffering from a forced and sudden lockdown caused by the global Covid pandemic.

Now things have improved. A huge reason for such improvement is that governments are seeking ways to bring about normality in business, and there is hope with the vaccine rolling out.

So, if you were too jittery to invest in 2020, here are some sectors to look at in 2021.

Auto sector

With many people forced to work from home, many didn’t need to travel. As such many didn’t require to buy a vehicle. Now, with lockdown restrictions reduced and offices partially opening up, we expect the sector to boom again. There is likely to be a revival in the demand for four-wheeler and two-wheeler automobiles in rural India. An additional boost for the sector will be the introduction of the voluntary vehicle scrapping policy for commercial vehicles over 15 years and personal vehicle over 20 years. If the policy comes in effect and owners are incentivised expect higher demand. Plus, with the government allotting different infrastructure projects, expect the sales of commercial vehicles further picking up.

The Travel Sector

No sector was as badly impacted as the travel sector. Once the world gets back to normal or some sought of normalcy returns, expect the sector to begin booming again. Pent-up demand for travel could have a positive impact on long-punished airline stocks, hotels and even cruise lines. We have already seen a favourable trend during the winter holiday season as courageous tourist looked to brave the ongoing pandemic to enjoy a break. Many sectors have already seen a slight bounce back. Even though safety and hygiene will be top priorities for travelers, expect travelers reaching new destinations.

The Financial Sector

During the pandemic, there was a lot of uncertainty on how to go about normal business in the financial sector. However, we are beginning to see a rebound with improved collection efficiency, emerging clarity over credit cost, healthy capital ratio, and higher provisioning coverage ratio, etc. Further improvement in credit will only help banks to witness sound earnings. Additionally, with people working from home, expect home improvement loans picking up which will aid Housing Finance Companies (HFCs). Plus, as this year’s budget suggested, the government will privatise two more public sector banks. The government has also proposed to set up an ARC + AMC structure to consolidate and take over the existing stressed debt. Additionally, PSUs will be further recapitalised for ` 20,000 crore through bonds. The budget also gave smaller NBFCs a chance to grow with the minimum loan size eligibility for debt recovery reduced at ` 20 lakh under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.

The Pharmaceuticals Sector

For quite some time, the pharmaceutical sector remained muted and was on a stagnant trajectory. However, with the pandemic and the vaccine soon to be rolled out, the sector has emerged asa winner. A number of factors have made investors bullish about the sector including incremental API opportunities, little scope for pricing pressure with the National Pharmaceutical Pricing policy covering a large number of molecules and the unlikelihood of a further price cut for Indian generic products.