4 sectors to watch for future multibagger stocks

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4 sectors to watch for future multibagger stocks

When it comes to investing in businesses for the long term, the most important aspect to consider is the future of the company’s product or service.

This means that for at least the next 10-15 years the products should be used. The last thing you want is for the product to become obsolete and the company to go bankrupt.

In addition, to generate good long-term returns from stocks, it is important to invest in areas that are developing.

Few sectors in India such as utilities, mining and others were good in the past and growing at a decent pace. However, these sectors are hardly trendy these days.

Therefore, with changing market dynamics, one should invest in sectors that have room for growth.

Here is a list of 4 sectors that are expected to grow in the next few years.

#1 Chemicals

India is the sixth largest chemical producer in the world.

The chemical sector is extremely diverse, covering over 80,000 commercial products and can be divided into bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers and fertilizers..

India is a world leader in chemical exports and imports, ranking 14th in exports and 8th in imports.

Recovering domestic demand and strong exports will lead to a 50% year-over-year increase in capital spending by specialty chemicals manufacturers in FY22 to US$815-842 million.

Despite a drop in demand for polymers following the COVID-19 pandemic, India is expected to see a growth of 32 million tons by 2030 for agrochemicals and pesticides.

To stimulate the domestic manufacture of agrochemicals, the government proposes to implement a Production Linked Incentives (PLI) scheme.

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The Department of Chemicals and Petrochemicals received US$27.43 million in the 2022-23 Union budget.

With all the above, it seems that the chemical sector has a good future and with growing demand and investment plans, good returns can be expected from this sector.

Here is a list of the best companies in the chemical sector and their performance

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#2 Multiplex

Light, camera, action!

The multiplex industry is coming back to the fore.

The multiplex industry has been one of the biggest victims of the Covid-19 pandemic. All the restrictions and regulations imposed during the last eighteen months of the pandemic have caused major losses to the industry.

However, today, as the world bids farewell to the pandemic, the multiplex industry is likely to be one of the multibagger sectors of the future.

People are back in movie theaters to enjoy popcorn and Dolby surround sound.

Recently, PVR and Inox Leisure, India’s leading multiplex chains, announced their merger.

Investors greeted the news with great euphoria, as the merger is expected to increase free cash flow, bargaining power and cost synergies for the combined company.

PVR is currently working with 860 screens and is investing Rs 240-300m to set up the next property with and has signed a deal with property developer M3M India.

Carnival Cinemas also hopes to have more than doubled its number of screens to 1,000 by the end of 2023.

Take a look at how multiplex stocks have performed lately…

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#3 Solar energy

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Over the past 7 years, India has seen the highest growth in renewable energy capacity addition among all major countries, increasing 18 times from 2.6 GW in March 2014 to 49.3 GW by the end of 2021.

Rapid technological advancements, government incentives for solar panels, and the growing competitiveness of solar energy storage batteries have all contributed to the deployment of clean energy.

In recent years, many investments and developments have been made in the solar sector.

Even recently, the Solar Energy Corporation of India (SECI), which is currently responsible for the development of the entire renewable energy sector, was allocated Rs 1 billion in the Union Budget 2022-23.

It has already held large-scale central auctions for solar parks, awarding contracts for 47 parks with a total capacity of more than 25 GW.

In the future, solar energy is expected to contribute around 280 GW (nearly 60%) to the country’s energy mix.

With a planned investment of $15 billion this year, India’s renewable energy sector is set to grow in 2022, with the government focusing on electric vehicles, green hydrogen and the production of solar equipment.

Let’s take a look at the recent performance of stocks in the solar sector…

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#4 Electric vehicles

Investors these days are interested in any business related, even remotely, to electric vehicles.

You see, according to a report by India Energy Storage Alliance, the electric vehicle market in India is expected to grow at a CAGR of 36% through 2026. Additionally, the electric vehicle battery market is expected to grow at a CAGR of 30% over the same period.

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After recovering from the Covid-19 pandemic, India’s automotive sector is witnessing rapid growth in 2022-23. Electric vehicles, especially two-wheelers, are expected to see increased sales in 2022-23.

By 2030, India could be a global leader in shared mobility, paving the way for electric and autonomous vehicles.

By 2030, the electric vehicle industry is also expected to generate 50 million jobs.

Observing governments’ plans for this sector, several automakers are getting into the business of electric vehicles.

To meet India’s electric vehicle ambitions, a cumulative investment of US$180 billion in vehicle production and charging infrastructure would be required up to 2030.

Well, looking at these government initiatives, one can imagine how stocks in this sector will become multibaggers in the future.

Let’s see how companies in this sector have fared lately…

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Conclusion

Well, these are the sectors that could give exponential returns in the near future.

These sectors are supported by government policy and the public interest in the product/service provided by the company.

However, in this volatile market where every day is different, it is very necessary to invest with caution.

Be prepared for a bump just ahead, but with the right information and good judgment, this ride can get beautiful too.

Remember, think twice and invest wisely.

Good investment!

Disclaimer: This article is for information only. This is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com

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