Knowledge HubThe 5 Best Sectors That Will Thrive In 2023

The year 2023: Top five sectors to watch


As we enter 2023, it’s natural for investors to be on the lookout for the best sectors to watch in the Indian markets.

While the past year was marked by uncertainty and volatility due to the Covid-19 pandemic, the Indian economy has shown resilience, and there are several sectors that are expected to perform well in the coming year.

we will take a closer look at some of the sectors that are likely to be the most promising in 2023, based on a combination of factors such as economic growth prospects, the regulatory environment, and market trends.

Whether you are a seasoned investor or a beginner looking to dip your toes into the market, this blog will provide you with valuable insights and help you make informed decisions about where to invest your hard-earned money.

1. Specialty chemical

China plus one. You've probably heard this term somewhere if you've kept up with the latest developments.

This is a structural megatrend in the making, and possibly the best opportunity for Indian chemical companies to step up their game.

Allow us to explain this with a bit of context.

Not many understand what happens in China because there’s no decentralized government in the country. The power is in the hands of very few people, and the people's opinions hardly matter. Consider it as a superpower.

What used to happen earlier was that China used to abide by the rules laid out. But this isn’t happening anymore under the leadership of Xi Jinping.

Of course, other countries won’t just stand by and let China become a superpower. Enter China plus one.

This is basically a shift made by companies across the globe to move out at least some of their operations (if not all) out of China and shift it to other emerging countries like India or Japan.

The specialty chemical sector is the biggest beneficiary of this shift. Just imagine this…if India manages to capture even a 5% market share from China, the country could see demand worth US$8 billion. That’s massive.

The shift has already started. Several Indian specialty chemical firms are setting up manufacturing units for meet the demand.

With more companies seeking to de-risk their supply chains from China, India could become the most attractive chemical hub in the coming 2-3 years.

You should keep an eye on the bigger chemical players, as they have the ability to ramp up their capacity and expand.

Also watch out for specialty chemical firms which dominate the segment they operate in…

On the top of our heads, we could think of PI Industries, Atul, Aarti Industries, Apcotex Industries, and Balaji Amines making the most of this megatrend.

2. Textile

In a world full of technological advancements, investors tend to focus on stocks from hot sectors like green energy or artificial intelligence, for that matter.

They end up ignoring conventional and dull sectors. That’s where they make the biggest mistake. Even dull sectors can make a strong comeback when the tide turns in their favor.

One such sector in the current context is textiles.

Earlier, global companies used to get cheap textile products from Bangladesh and Vietnam, making it tough for Indian companies to export. The situation changed in early 2022 when a ban was imposed on import of cotton from China to the US. Indian exports boomed.

However, demand was badly hit owing to recession in the following months. The slowdown was on the cards as Indian textile players export heavily to US and Europe.

The nail in the coffin for them was that some companies already had capacity expansion plans. With demand down in the dumps, textile stocks were hammered on the bourses.

The tide is slowly turning for the industry as cotton prices are on a downtrend. Domestic demand is also looking strong in case exports dampen sentiment.

Strong players like Trident, KPR Mill, Arvind, Vardhman Textiles, Lux Industries, among other are down around 30-40% in the past one year. They could bounce back in 2023.

 3. Infrastructure

This is an obvious name in the list. You probably thought of infrastructure when you opened this article, didn’t you?

In the past couple of years, India’s GDP growth has remained moderate. We believe things have bottomed out.

Why we say this with almost surety is because of government's focus on infrastructure, affordable housing, and capital expenditure.

The government has targeted more than a trillion-dollar infrastructure spending in the next 5 years.

We are already seeing a strong momentum in construction equipment sales, record road construction, and capacity expansion by companies. All of this proves that we have a strong capex cycle ahead.

The obvious way to play this theme is by investing in good quality infrastructure companies which have a track record of timely execution.

Larsen & Toubro (L&T), IRCON International, NCC, Rites, and Railtel Corporation could do well this year owing to their strong balance sheets and healthy order books.

 4. Pharma

We know what you’re thinking. Why have we listed a hated sector with hated stocks in this article? A sector that has time and again been questioned and always has a dark cloud looming on top in the form of USFDA.

The answer to this lies in the recent Covid outbreak in China.

Worries about the Covid outbreak in China have made investors nervous and the stock markets jittery.

It’s déjà vu for pharma companies all over again as they have started to show a similar movement like 2020.

Pharma companies were the biggest beneficiaries during the initial Covid period as demand for medicines boomed. It was an obvious choice for investors as the sector also came with a ‘defensive’ tag.

Now, as Covid cases have started to rise again in China, pharma stocks are moving both ways.

Mind you, not all pharma companies will be beneficiaries and you need to be selective to play this theme.

The way we see it, Granules India, IOL Chemicals, Dr Lal PathLabs, and Cipla stand to be the biggest beneficiaries.

Cipla because of its huge respiratory portfolio (the company still continues to expand its respiratory portfolio!)

IOL Chemicals because of Ibuprofen (this drug was sold like hot chocolates in initial Covid days)

Granules India because it’s the largest seller of paracetamol.

And Dr Lal PathLabs because diagnostic players will need to carry out testing of Covid (and also because of its classy balance sheet).

 5. Tech

The reason we have listed the tech sector towards the end is because it’s a high-risk high-reward scenario.

Owing to global recession concerns, attrition shooting up, and margins under pressure, IT stocks such as TCS, Infosys, Wipro and HCL Tech went on a correction mode and fell up to or more than 40% from their peak!

How often do you see a bluechip stock correct more than 50%? It’s very rare, right?

Now imagine what would have happened with new age tech stocks like Paytm, Zomato, Nykaa and the likes.

These growth stocks crashed more, (70% in case of Paytm) as higher interest rates are always a no-go for them. The only reason growth stocks boomed was because of the low interest rates.

As things stand now, majority of the newly listed stocks are down over 50% from their peak.

Select stocks from the space are looking attractive, at least from a medium-term perspective till the end of 2023.

We would give preference to Zomato, Paytm, and Nykaa.

Before you start questioning, we know that some of these are loss making businesses and are burning cash at the moment.

But do you really see Paytm going away from your phones anytime soon? Will you let go of the app which has all the needs at one tap?

Similarly, Zomato enjoys a dominant market share and has taken several measures to cut down on expenses.

Nykaa is already profitable and a known brand among many consumers. With a strong management at the help, the company is expected to do well in 2023.

Jhaveri Securities has a strong research team which is well qualified to do research on various industry segments. You can connect with our research team to get insights on emerging industry sectors.

That’s it from us for the time being. We hope this article provided crisp insights and aroused your curiosity to find the best stocks for 2023.

Please connect to Jhaveri Customer support desk to invest in verity of products available with Jhaveri Group. 

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