The 2025 Playbook for Stock Investors: Track These 3 Powerhouse Sectors

Investors looking for top-down opportunities in 2025 should focus on three emerging powerhouses: the digital revolution in healthcare, the ripple effects of the infra boom, and artificial intelligence (AI) technology-driven transformation.

While global markets grapple with persistent inflation and geopolitical tensions, India’s domestic growth engine remains strong, bolstered by a sizeable middle class, increased manufacturing capacity and strategic policy reforms. The key to success lies in identifying sectors that benefit from these structural tailwinds, which will ultimately yield returns to investors.

The investment landscape for 2025 is being shaped by several transformative developments. First, India’s healthcare modernization is accelerating at a pace reminiscent of China’s transformation from 2007 to 2021, albeit with one crucial difference: it is driven by private enterprise rather than state intervention.

Second, the government’s $1.4 trillion infrastructure push is creating opportunities not only in construction, but also in supply chains that include smart-city technologies to basic materials. Finally, India’s emergence as the world’s third-largest AI talent pool is attracting unprecedented investment in technology and digital services, signaling a shift from traditional IT services to high-value innovation.

Additionally, these sectors currently exhibit valuations that favor investors. Much of the rest of the market has been overvalued in recent years, prompting investors to focus on sectors that are undervalued to reduce risks. This strategic focus will increase the risk-reward ratio of the portfolio. In this context, healthcare, IT and infrastructure sectors stand out.

Healthcare is healthy

India’s healthcare sector is poised for significant change from 2007 to 2021, similar to China’s boom, driven by strong macroeconomic and demographic factors. Due to relatively low public healthcare costs compared to global standards, the private sector has developed significant medical infrastructure over the past two decades.

India’s pool of highly qualified medical personnel provides a competitive advantage. Additionally, compared to other Asian countries and Western countries, India is more cost-efficient. Surgical procedures in India cost a tenth of what they do in the US or Western Europe.

Healthcare services are benefiting from several long-term structural drivers. Increasing urbanization and rising income levels are driving the demand for high-quality healthcare. Additionally, increasing life expectancy and an aging population, along with a high prevalence of non-communicable diseases (NCDs), have led to the expansion of health insurance coverage and an influx of medical tourism, each of these elements contributing to the growth of the overall sector.

The Indian healthcare sector is experiencing significant growth with private equity and venture capital investment expected to cross $1 billion in the first five months of 2024, representing a 220% increase over the previous year. In 2023, India’s hospital market was valued at $98.98 billion and is projected to grow at a CAGR of 8.0% from 2024 to 2032, to reach an estimated $193.59 billion by 2032.

(Source: IBEF)

Based on median age and GDP per capita, analysts believe that India is on par with China in healthcare spending in 2007, followed by a prolonged increase in spending that will continue until 2021. Expect to see in the hospital sector. 12.6% revenue CAGR from 2024 to 2034, driven by overall economic growth, rising consumer healthcare spending, and population growth, which, in turn, will increase demand for hospital beds.

The Government of India plans to increase public health expenditure to 2.5% of the country’s GDP by 2025. India’s competitive advantage also includes a high success rate for Indian companies in obtaining Abbreviated New Drug Application (ANDA) approvals. Additionally, India presents significant opportunities in research and development as well as medical tourism. In summary, there are huge opportunities for investment in healthcare infrastructure in both urban and rural areas of India.

Building Materials – Steady Foundation

India’s wires and cables industry is experiencing strong growth due to significant infrastructure development, expanding energy sector, telecommunications and the rise of electric vehicles. The market is projected to grow at a compound annual growth rate (CAGR) of around 15% from 2023 to 2028, supported by government initiatives such as “Power for All” and investments in smart grids and renewable energy.

The Indian tiles industry, which includes ceramic, vitrified and other types of tiles, is also growing with an expected CAGR of around 12% from 2023 to 2028. This growth is due to rapid urbanization, expanding residential and commercial real estate sector, and growing trend of home renovation and interior design. Additionally, India’s cost-competitive and high-quality tile products are experiencing increasing demand in international markets.

Meanwhile, the plywood industry in India, which includes plywood, laminates and veneers, is projected to grow at a CAGR of around 8-10% from 2023 to 2028. Boom in the construction sector, increasing demand for furniture and interior decoration and adoption of eco-friendly building materials are the major drivers of this growth. Expansion of industry is further supported by increasing exports.

In summary, India’s wire and cable, tiles and plywood industries are witnessing significant growth due to infrastructure projects, urbanization and growing consumer demand. The government’s focus on housing, smart cities and renewable energy is further driving these markets, with leading companies expanding their capabilities and innovating to meet both domestic and international demand.

Information Technology – Forward Motion

The Information Technology (IT) sector in India serves as a major engine of growth driven by a combination of highly skilled workforce, vibrant entrepreneurial culture and supportive government policies. Contributing around 7.5% to the country’s GDP, the sector has evolved from its initial focus on software services and outsourcing to embrace advanced technologies such as artificial intelligence (AI), data analytics, cloud computing and the Internet of Things (IoT).

India has long been a leading player in the global IT landscape, thanks to its large pool of talented professionals and business-friendly environment. Many international companies outsource IT projects to Indian companies, which are leading providers of software development and maintenance services. Recently, the IT sector in India has increasingly adopted innovative technologies such as AI, cloud computing and IoT. The government has introduced several initiatives to support the development of these technologies and numerous Indian IT companies are making significant investments in these areas.

One of the key initiatives launched by the Government of India to support the growth of the IT sector is the Digital India programme, which aims to provide broadband connectivity to all citizens and encourage the adoption of digital technologies across the country. Another notable initiative is the Software Technology Parks (STP) scheme, a 100% export-oriented program designed to promote the development and export of computer software, including the export of professional services through communication links or physical means.

Overall, with favorable government policies, a large pool of skilled workers and growing demand for digital technologies, India’s IT sector is expected to continue its strong growth in the coming years. Microsoft, Bain & Co. And a report by the Internet and Mobile Association of India (IAMAI) shows that India produces 16% of the world’s AI talent pool, ranking it the third largest globally.

(The author is Manish Jain, Managing Director, Bajaj Broking. Views are his own)