Dynamic Sectors to Remember In the Month of September

Wake up and invest before September ends. In the month of September so far, five sectors have grown like a youth who has a wolf in his belly. Dynamic Levels Research team has listed them as follows:

Auto Sector – Tubes & Tyres:

The share price of tyre firms jumped 6.35 per cent recently on anticipations of improvement in margins following a sharp slump in rubber prices. On expectation of better profit margins, the investors are buying fresh shares. Currently trading at Rs.12,014.25 a quintal in the domestic market, natural rubber price has touched the lowest in 5 months following global trends. The reason of the fall has been attributed to a sudden jump in output. A data compiled by the Rubber Board showed that India’s natural rubber production surged 11 per cent in July from a year ago to 52,000 tons. Meanwhile, imports fell marginally in the month of July to 41,157 tons from 41,917 tons, while consumption rose 4.3 per cent to 83,400 tons on a year-on-year (YoY) basis. However, the fall in prices seems temporary since it is based on the supply cut by the major producing nations. Meanwhile, a grouping of Indonesia, Thailand and Malaysia – the International Tripartite Rubber Council, has decided to trim exports by an additional 85,000 tons from September to December this year.

Thus so far in September, the auto sector stocks have outperformed the market by rising up to 21 per cent against 0.30 per cent decline in the Sensex. The Central Government is also working on a National Rubber Policy aiming to increase the domestic rubber production in the long term to control surging imports.

The top performing stocks in the auto sector in the month of September so far as per Dynamic Levels are:

• CEAT – which has shown a growth of 26 per cent in share price.
• Apollo Tyres – which has witnessed an 18 per cent growth in share price.

Sugar Sector:

In the month of July, shares of 9 sugar companies had more than doubled. There were reports which suggested that in the hope of strengthening financial health of the companies further owing to higher sugar prices because of fall in production, in India and other major producing countries, culminated in the appreciation. Upper Ganges Sugar & Industries, OudhSugar Mills, Mawana Sugars, Dharani Sugars, Ugar Sugar Works, Dwarikesh Sugar Industries,, Thiru Arooran Sugars, Uttam Sugar Mills and Rajshree Sugars had rallied up to 350 per cent. The share prices of many sugar firms had recently scaled to 52-week highs on improving prospects of the sugar industry and the companies. After a dark phase in the last few years, some companies did turn around recently.

In the month of August, the sugar stocks had rallied again as the government had introduced formula for production subsidy. Earlier, the sugar subsidy was meant to be disbursed on the basis of export estimations and ethanol output. The Union Cabinet in August had approved provision of production subsidy to sugar mills on grounds of actual exports and supply of ethanol. The move was seen to be helping the mills offset the cost of cane and also facilitate timely payment of cane price dues of the farmers. Initially, the export quota target was scaled to 15.70 kg of sugar for each ton of estimated cane crushing. Now, the export quota was to be revised on a scale of 15.70 kg of sugar for each ton of cane actually crushed by the mills during present sugar season or previously notified MIEQ – minimum indicative export quota target, whichever was lower.

On the 19th of September, sugar stocks surged up to 18 per cent amid hopes weak supplies worldwide might lift sugar prices further highs. A data showed Piccadily Sugar & Allied Industries rose 17.71 per cent to Rs.8.24. Dharani Sugars & Chemicals soared 12.94 per cent to Rs.38.85. Dalmia Bharat Sugar surged 12 per cent to Rs.126.90. Dhampure Speciality Sugars, Mawana Sugars and KM Sugur Mills galloped 8.01 per cent, 9.07 per cent and 6.84 per cent, respectively.

The top performing stocks in the sugar sector in the month of September so far as per Dynamic Levels are:

• Triveni Engineering – which has shown a growth of 20.5 per cent in share price.
• Oudh Sugar – which has also witnessed a 20.5 per cent growth in share price.

Infrastructure Sector – Construction, Engineering and Material: The infrastructure sector recently witnessed a decent boost which cannot be ignored. The government has been involved in a lot of infrastructure projects recently. This is the reason a lot of buying is seen in the infrastructure stocks lately. However, this sector has had a slow growth in stocks. In the past one year, the Indian government has intensified its efforts to increase investmentsin the infrastructure sector. Some of these efforts are paying off well in terms of improvement in construction activities. In the Budget, the Modi government had earmarked Rs.22,1246 cr for infrastructure. This should boost business of infrastructure companies, including roads, cement, logistics and construction. These companies shall benefit not just from the increasing investments, but also from the reforms set free by the government.

Reforms like hybrid annuity model (where the government would bear 40 per cent of the cost of a project while the developer would bear the remaining), releasing of 75 per cent of arbitration amount which the government owed to construction companies, have enhanced business sentiment in the infrastructure sector and eliminated several hurdles in doing business. A scheme named Canara Robeco Infrastructure Fund has convinced quite a few investors. It invests in companies which come under the infrastructural theme. Unlike this, there are many schemes in the industry which claim to have infrastructural focus but invest largely in firms which are proxy to the sector. In a 5-year period, the scheme gave close to 13.8 per cent, while its peers gave returns in the range of 10-11 per cent. In the last 10 years, the scheme hasbeaten its benchmark S&P BSE 100, that has given 9.7 per cent returns versus scheme’s 13 per cent. The top performing stocks in the infrastructure sector in the month of September so far as per Dynamic Levels are:

• Simplex Infra – which has shown a growth of 9 per cent in share price.
• IRB Infra – which has also witnessed a 7 per cent growth in share price.

Chemical Sector: September has seen the chemical sector boost considerably. India’s chemical sector is valued at nearly 25 billion dollars and has delivered double-digit growth in the last 5 years. It is also seen as one of the next mega-trends that investors can bet on. The sector accounts for a marginal 3 per cent of the worldwide specialty chemicals market. A report said that it has delivered 13 per cent growth over the past 5 years, primarily led by domestic consumption.

Meanwhile, with global chemical firms making ambitious growth plans, they are also taking steps to enhance efficiency and improve productivity with minimum carbon footprint.

At the recently culminated India Chem 2016 conference, Ananth Kumar, Union Minister for Chemicals & Fertilizers stated that the Indian chemical industry is expected to grow at 9 per cent annually to become a 226 billion-dollar sector by 2020 from present 147 billion dollars, driven by both growth in end-use industries and government initiatives.

The top performing stocks in the chemical sector in the month of September so far as per Dynamic Levels are:

• Bhageria Chemicals – which has shown a growth of 52 per cent in share price.
• Thirumalai Chemicals – which has also witnessed a 49 per cent growth in share price.

Pharma Sector: Currently, the Pharma sector has shown a decent growth of 5.7 per cent. A month ago in August, pharma shares had fallen due to USFDA inspection and entered the bear grip, with as many as 36 stocks slumping in excess of 20 percent from their 52-week high levels. Pharma is one sector which has given consistent returns for the past many years.

The BSE Healthcare Index had fallen 12 per cent as compared to a 6.6 per cent rise in the BSE Sensex. While the Sensex was hitting fresh 52-week highs on a daily basis, the BSE Healthcare index was down 15.40 per cent from its one-year high level.

Below lies the Index performance over the past decade:-

Pharma is one sector, where Indians have created huge domain expertise. India has the ability to make drugs cheaper. Analysts stated that healthcare was one area where expenditure was likely to continue to grow in the west. The market experts were pretty correct in their predictions. The pharma sector has picked up again in September and is doing considerably well.

The top performing stocks in the pharma sector in the month of September so far as per Dynamic Levels are:

• FDC Limited – which has shown a growth of 21.36 per cent in share price.
• RPG Life – which has also witnessed a 20 per cent growth in share price.

Conclusion: According to Dynamic Levels Researchers, the Auto sector is leading among other sectors in terms of growth in the month of September so far. Sugar sector acquires the second position followed by Infrastructure and chemical sectors, and last but not the least, stands the pharma sector.

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