Typically, increased consumer spending during the Diwali season tends to boost company revenues and profits, which results in higher stock prices. The positive sentiment and overall favorable optimism around the festivities drive investor confidence in the market.
This often leads to increased buying and selling activities in the stock market. Notably, the Indian stock market has been relentlessly defying odds since last year and maintained a strong growth trajectory despite the ongoing global crisis.
This positive momentum has enabled the market to offer traders ample choices this festive season to bet their resources on for maximum profitability. However, some sectors continue to perform well and are better positioned to generate returns.
Let’s discuss some lucrative sectors that traders and investors can consider this Diwali season for higher profits.
Banking and Finance
In recent years, India has emerged as a center for IT and banking services. As the festive season approaches, the bank loans are at a 12-year high. In addition, some of the leading banking names have been consistently performing well. Even when we look at the evolving fundamentals of banking and finance companies, most have wiped off their NPAs successfully in the last 3-4 years.
With a fresh lending cycle starting, most banking companies would witness credit growth. In turn, they pave the way for lucrative performance for most banking and finance stocks.Some of the lucrative names in this space this Diwali could be – SBI Bank, ICICI Bank, HDFC Bank, TCS, Infosys, IDFC Bank, IRFC, and Manappuram Finance.
IT and Electronics
The festive season has been known as a catalyst for demand for IT services and electronic companies, as many individuals opt for gadgets and electronics as their choice of Diwali gifts or upgrade their existing home appliances or office devices and software.
This surge in electronics and e-commerce sales prompts higher revenue for leading IT companies, making the sector a lucrative bet during Diwali.
Additionally, the IT sector has been enjoying a positive momentum for some time as technological advances in Artificial Intelligence and the Internet of Things keep traders and investors intrigued with its potential.
The sector has been trading around a 25% discount from its recorded all-time high, and experts anticipate a tremendous growth of nearly 20-50% from this point in the next 9-30 months.
Individuals can expect a large percentage of that momentum from this festive season.
The automobile sector typically records higher sales during the festive season as most high-end discretionary purchases, including vehicles, are carried out around this time. To further draw them in, automakers and retailers extend special promotional discounts and offers around the festive season.
For instance, domestic passenger vehicle wholesales grew 16% to 3.91 lakh units in October, up from 3.36 lakh units last year.
Taking a cue from this year’s industry growth, individuals can anticipate a continuation of robust sales during the festive period. Some top picks from this sector include Tata Motors, Hero Moto, Bajaj Auto, Mahindra and Mahindra Ltd, MRF, and JK Tyre.
Real Estate and Construction
Indians consider the Diwali season an auspicious period to make any big-ticket purchases, including real estate buys or investments in property segments. Plus, this year, the country’s housing sales in the top 7 cities recorded an all-time high in Q3, with a 36% annual growth at 1.20 lakh units. In addition, despite the rising prices, the residential real estate sector is expected to surge further during the festive season.
Aviation, Port, and Logistics
During Diwali, e-commerce giants and logistics companies witness a high volume of orders and corresponding sales. This festive season, the logistics sector, which is valued at $435.43 billion and is projected to touch $650.52 billion by 2028 at a rate of 8.36%, is ready for a Rs. 90,000 crore boom. Even if we keep the festive season out of the picture, supply chain management and logistics make up the backbone of our economy. As the ever growing need for efficient value chains continues to grow. As a result, companies that cater to these segments will enjoy a positive growth trajectory.
Despite the recent sluggish trends and losses, the stock market could gain substantial momentum during the festive week. Sectors like banking and finance, IT, automobile, real estate, and construction could see amplified movement in this Diwali season, with the sentiment being bullish on the market.
However, individuals who intend to trade in these sectoral stocks should analyze their scope and past performance during key festive seasons.
Similarly, long-term investors willing to stay invested can consider these sectors, but they might consider parking resources in parts.
(The author, VLA Ambala, is Founder, Stock Market Today)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)