2016 expectations: Pharma, infrastructure to pick up pace

The pharmaceutical industry is expected to do well in 2016. A few recent developments where the US FDA approved medicines by Aurobindo Pharma and Cipla are a good sign for the sector on the whole.

The pharma industry will grow and

corner even more share in the market. India’s skilled labour, experience in pharma and a market hungry for cheap medicine will help the pharma industry launch new drugs, explore new markets while expanding the existing ones.

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Infrastructure

The most neglected sector in the last few years is getting a new lease of life by the transport and highway ministry as well as the railway ministry. 2015 saw a fast disposal of tenders and infrastructure projects signed up with foreign firms in defence and railways. The pace will only continue in 2016. The signing of the bullet train project

with Japan will further boost the development of support infrastructure in the railway sector. Moreover, work is on to increase the average speed of trains to about 100-150 km per hour.

Banking and Finance

The banking sector, in general, may not offer much to cheer about but private banks are expected to do better. Public sector banks have been reeling under the pressure of unmanageable NPA (non-performing assets) for a few years now. While the worst seems to be factored in their stock prices, it is too early to predict the future course of their performance. Private sector banks have controlled their NPAs and are in much better shape to reward investors. Housing finance companies too could do better in 2016.

Other sectors

Sectors such as IT, manufacturing, auto, and real estate may do marginally better. These sectors are expected to pick up in 2016 as economic growth looks to stabilise at 7-8 per cent.

Risks in 2016

The two major risks in equity investing in 2016 are US Federal Reserve action and China’s response to its growth problem. The US Fed action on interest rate affects the market all over the world. A rise in interest rates in the US will see US investors pulling out of the market, which may result in the market sliding. However, the impact of the Fed on long-term investing is not big. The slowing of the Chinese market is no longer news. This is bound to happen and the stock market has factored it already. The question is how low the growth can go. Growth forecast of 5 per cent or less for the Chinese market may impact markets around the world. China has become the biggest trade partner with almost every country in the world, hence the impact of its slowdown would be all pervasive.

Despite the risks, the Indian market remains an attractive proposition for long-term investors. Since it is starting at a lower base, the possibility of the Indian growth rate surpassing those of major economies is high.

The only long term-risk is our lawmakers’ action on the economic front.

2015 may not have been very inspiring as far as major changes and reforms were concerned, but 2016 can change the trend and build a solid foundation for India’s long-term growth.