Gifting stocks this Christmas? Check out the process and implications
December brings along with it the happiness and pleasant memories of Christmas. It is important to cherish and enjoy the festivities, but at the same time, it is also essential to take care of your financial health.
One of the best ways to generate wealth, utilize idle money and plan for the future is by investing. The stock market offers various sectors and industries to invest in and participate in the “Santa Rally”, a phenomenon used in stock market parlance that causes markets to rise during the last week of December and a few days into the new year. Here are some sectors to invest in Christmas that can be very rewarding for you.
Banking and Finance
2022 saw an increase in interest rates and also inflation. This led to severe underperformance of the sector during the year, but it has been steadily recovering. In fact, some stocks in this sector have been performing well recently. With overall improvement in asset quality, increasing margins, and a strengthening credit cycle in the economy, this sector should be on the radar for investors. The earnings of banks at the start of the 2023 calendar year might remain in focus while the sector shows growth prospects in the upcoming year. If inflation comes off its peak, there can be a gradual and strong recovery in this sector.
One of the most promising sectors to invest in at Christmas is the defense sector in India, as it has seen rapid growth in recent years. The government’s steps towards self-reliance and the Make-in-India initiative are especially beneficial for Indian defence companies. The Ministry of Defence of India has set a target to double the defence production by the year 2025. Indian defence companies have a healthy order book and support of government initiatives which make this sector a strong investment candidate.
While picking out stocks for Christmas, one of the sectors to consider should be the green energy and renewables sector. With growing concerns about climate change, global warming and carbon emissions, companies and governments are emphasizing the change to cleaner sources of energy.
India has pledged to become net-zero carbon emission by the year 2070. Furthermore, governments and companies have channelled a lot of funds towards the development of renewable energy. Setting up solar projects, wind energy and biomass energy has led to a great deal of investments in this sector which is expected to receive further investments of $500 billion by the year 2028. Investing in the green energy sector this Christmas is a great gift to the environment as well as yourself.
The Indian specialty chemicals sector is expected to grow at a CAGR of 12.4% to $64 billion over the next 4 years, according to the India Brand Equity Foundation. With the increase in consumption, there will be a need to increase production as well. Since specialty chemicals are used in the manufacturing process, the increased demand and production will benefit the companies in this sector.
Another great sector to invest in this Christmas is the automobile industry, especially the companies focused on the production of electric vehicles (EV) and automobile ancillaries. Along with the transition towards green energy, India is also witnessing the pivot towards EVs. The government has provided many subsidies and incentives to increase the demand and production of EVs. The effects of the government’s initiatives are clearly visible due to the increasing sales of EVs in the country. In addition, the demand for passenger vehicles (PV) and commercial vehicles (CV) is on a steady growth trajectory as well. The increased demand for automobiles helps the companies involved in the production of automobile ancillaries like wheels, tires, EV batteries, etc. Investing in this sector can help provide decent returns in the near future.
The infrastructure industry is another great candidate that investors can pick stocks for Christmas. Infrastructure development is the backbone of any growing economy. Developed infrastructure helps in improving the quality of life while providing the added benefit of reducing costs and aiding production. For these reasons, the government has increased capital expenditure by more than 35.4% for FY23. This significant jump in capex along with the different PLI schemes and the Make-in-India push, will help the companies in this sector grow. The development of roads, bridges, railways and other infrastructure projects is likely to increase in the coming years and will help boost the economy.
In conclusion, an investor should invest and create a diverse portfolio while investing this Christmas. Indian markets relatively outperformed in 2022 despite the volatile market conditions. 2023 may offer many more opportunities to invest, but an investor should be wary and do thorough research in order to find the most promising stocks and sectors to invest in.