Which sectors are in focus for retail investors for 2023?

For investors, 2023 can be a silver lining after a prolonged period of economic slowdown. Just after the world started recovering from the woes of the pandemic, geopolitical issues such as Russia –Ukraine war or the trade war between US and China clouded the economies’ growth again. However, with IMF raising the growth forecast for India for 2023 can be the beginning of new prospects. The updated real GDP growth forecast for 2023 is 6.1%. However, there are still some clouds hovering over the outlook, which is primarily the inching-up inflation which has also been forecasted to be around 5.1% this year.

That said, the stock market seems to be positive as it is rising since last year after the sluggish period during the pandemic. Last year, Sensex and Nifty both rose to new highs and this year as well can grow further. Now in this scenario, if you are sceptical about which industries or sectors to invest in, then here are 5 sectors which you can consider.

Banking and Fintech

Recently, banking expert K.V Kamath suggested that the banking and fintech industry can grow at a CAGR of 10% to 15% in 2023 even when there is a fear of global recession looming on our heads, as predicted by the World Bank. The gross non-performing assets (GNPA) are considerably decreasing. It is also expected to decrease in 2023 by 5.3% which is great news for investors who are thinking of investing their money into banking stocks.

The prospect of the Indian banking sector looks promising as after the series of repo rate hikes the previous year to tackle inflation, the RBI is expected to pause further rate hikes this year. This will help the credit facility to get back in demand and thus increase the profit margins of the banking sectors. However, there are challenges as well, and the main concern is the increased interest rate which is becoming a problem for individuals as well as companies to repay their loans.

While the traditional banking system is supposed to grow, so is the disrupting technology in the finance sector which is the fintech industry is here to grow and stay as well. It is expected that by the end of 2030, the fintech revenues will reach around $200 billion while the asset under management of these fintech companies can reach around $1 trillion. So, if you are investing for the long-term, this fintech industry can be a good option for you to place your money.

In 2023, there are primarily three main trends that investors can notice in the banking and fintech sector which are –

• Growth in Neobanks and their product range. These Neobanks already witnessed a five times growth in its funding in the previous year and the current market size is $48 billion and it is expected to reach around $215 billion in 2023.
• AI is going to drive growth in this sector especially when it comes to digital lending. This market is expected to reach $515 billion by 2030.
• Investments-based fintech companies or the wealthtechs have already witnessed a massive jump in the number of new Demat account openings in the previous year, and it is expected to grow further in 2023. Close to 90 million Demat accounts were opened in FY22 which is a 63% jump from the previous year.

Capital Goods

The capital goods industry was sluggish for the longest period however, the China plus one strategy is expected to boom this sector again. Moreover, the decreasing inflation rate and easing interest rates are also going to play a pivotal role in the growth of the CAPEX sector.

The electrical capital goods segment is expected to grow around 11% CAGR till 2025 as anticipated by the experts. However, they have lowered their expectation due to a slowdown in the previous year’s second half.

The government is giving the right push to this sector as well and the total capital goods production is expected to hit $100 billion by 2025.

Pharma

Indian Pharmaceutical sector is the largest in the world when it comes to generic medicines. It provides for almost 20% of the global share of generic medicines and is also one of the biggest vaccine manufacturers in the world.

As per experts, 2023 looks great for the pharma industry in India and globally as well. As per a report produced by EY FICCI, the Indian pharma sector is expected to hit $130 billion by 2030 while the global market can touch the $1 trillion mark by 2023. If you are thinking of long-term investments in pharmaceutical stocks, then the long-term outlook also looks positive. It is expected that this industry will grow at a CAGR of 13.01% between 2023 and 2028.

While the covid-19 made this industry witness a huge transformation and government intervention as well as support, at present, the eyes are on the innovations which are being carried out on different advanced biologics, and alternative therapies as well as gene and cell therapies. These research and developments are expected to change the healthcare system and provide betterment for the people.

Real estate & green buildings

The next sector that is expected to boom in 2023 and the upcoming years is the real estate sector. This year, residential real estate demand is anticipated to grow at a CAGR of 10% to 15%. One of the major trends that are being noticed is the inclination of buyers as well as builders towards environment-friendly properties or green real estate. There has been a growth of green homes in the top six cities of the country to an extent of 31%.

While Tier I cities have always driven the growth in the real estate industry, in 2022 it's being observed that the Tier II cities such as Coimbatore, Indore, Nagpur and Bhubaneshwar have evolved as significant driving forces for this sector. This year, the same trend is expected to continue.

Another trend to watch out for in this industry is the rising demand for co-working spaces and co-living properties. This trend is mainly witnessed amongst the millennials and as per the FICCI report co-living and co-working demand can grow to Rs. 1 lakh crore in 2023.

Last but not the least, technology is driving growth in the real estate segment as well. With proptech applications, it has become easy for buyers to rent or buy properties. While e-commerce services which offer instant deliveries of daily requirements are also helping many real estate projects to be back in demand as home buyers now do not have to worry about the distance to the market or ATMs.

Travel and tourism   

The pandemic made the travel industry suffer the most, however, also made people understand the value of travelling in the true sense and spending time with themselves and family. Along with these, mass vaccination drives helped the industry to bounce back in the mid of last year.

By the end of 2023, the travel industry is expected to hit a $14.92 billion market value. Also, the industry is expected to grow by 3.5 times in the coming few years. The global tourism market is predicted to grow by 30% this year as well.

As per the government’s propositions, it is expected that in the next ten years, there will be more than 60 new airports. This can boost the number of domestic flyers to 330 million by 2032 which was 85 million in the previous financial year.

However, after the pandemic, there has been a paradigm shift in the travelling habits of people. Now, people are more interested in spiritual hubs, remote places and adventurous ones rather than popular destinations. Even cultural destinations are witnessing massive demand this year. Work from mountains, work from the sea, and staycations are gaining traction in this after Covid-world.

Wrapping up

So, for retail investors, the outlook for 2023 looks promising and there are different scopes for investments both short-term and long-term. That said, retaining investors need to evaluate the pros and cons of every sector, and then the companies they are putting their money into to make wise choices.

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