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Fab Four - The 4 sectors to watch out for

| 6/20/2011 12:23 PM Monday

With rising interest rates, inflationary pressures, geopolitical tensions, declining GDP growth rates, a gloomy global economic scenario and what not, the market is presently surrounded by all kinds of negatives. So much so that even a good set of numbers from India Inc in the March quarter failed to act as a trigger for its next leg up. As it continues to grapple for a meaningful direction, a good monsoon season is now being looked upon to act as the much-needed next big trigger for it. But aren’t ups and downs an integral part of the market? The smarter investors will always be on the look-out for avenues to park their funds even in uncertain times so as to reap the benefits of higher returns when the tide turns over. After all the equity markets are known to offer decent normalised returns over a longer period of time.

Having said that, the million dollar question is: Where should one invest during such uncertain times? There are many in the know who are suggesting that investors should adopt a stock-specific approach in the current times. However, as a first step to safe investing in such times when the market is just about trying to come to terms with larger macro-economic issues such as rising interest rates and burgeoning inflation it would be better to apply a top-down approach. Figuring out the sectors that are worth investing in the current market scenario particularly with an eye on the longer term prospects of your portfolio would be a much sensible thing to do.

Why do we think so? It is the top-down approach to stock-picking which will help in factoring in the larger macro economic factors currently afflicting the market in a much better manner. Selecting the correct sectors and then narrowing down to stocks within these sectors is sure to help investors create a correct balance between the risks and rewards going forward.

Now, coming to the core of our discussion, which are the sectors that one should invest in with a one-year perspective to earn decent returns? Though the recent results point towards a good performance from India Inc, there are many sectors which are reeling under pressures thrust by factors like rising interest rates, higher inflation, rising commodity prices, etc. For instance, many would be expecting the automobile sector to be a part

 

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