India is a developing economy, and in the past few years, it has established itself as a key player in the world and has become the 4th largest economy in the world. And with this growth, there are various stocks which move in line with the economy of the country, such stocks are known as “Cyclical Stocks”.
In today’s blog post, we will give you an overview of the best cyclical stocks, along with the benefits and factors to be considered before investing in them.
What are cyclical stocks?
Cyclical stocks refer to the shares of those companies whose performance depends upon the economic cycle of a country. When the economy is in a growth phase, it tends to perform well, and whenever there is a condition of economic slowdown in the country, its performance also struggles. Because consumer spending tends to increase during economic growth and vice versa, so as the performance of cyclical stocks.
Top Cyclical Stocks to Buy in India
- Shriram Finance Limited
- Punjab National Bank Limited
- ABB India Limited
- Jindal Steel Limited
- Shree Cement Limited
- SRF Limited
- The Phoenix Mills Limited
- JK Cement Limited
- Honeywell Automation India Limited
- Tata Chemicals Limited
List of Top Cyclical Stocks in India
| Company | Current Market Price (INR) | Market Capitalisation (in INR crore) | 52-Week High | 52-Week Low |
|---|---|---|---|---|
| Shriram Finance Limited | 975 | 183508 | 1026 | 493 |
| Punjab National Bank Limited | 123 | 141248 | 128 | 85.5 |
| ABB India Limited | 5093 | 107925 | 6597 | 4590 |
| Jindal Steel Limited | 1010 | 103060 | 1098 | 723 |
| Shree Cement Limited | 26950 | 97238 | 32508 | 24811 |
| SRF Limited | 3023 | 89615 | 3325 | 2484 |
| The Phoenix Mills Limited | 1904 | 68094 | 1965 | 1402 |
| JK Cement Limited | 5718 | 44182 | 7566 | 4219 |
| Honeywell Automation India Limited | 33500 | 29614 | 42100 | 31025 |
| Tata Chemicals Limited | 747 | 19029 | 1027 | 742 |
Read Also: Best Growth Stocks in India
Overview of Best Cyclical Stocks to Buy in India
1. Shriram Finance Limited
Shriram Finance Limited was incorporated in 1974, and started its working by focusing on financing commercial vehicle segments. However, over time, the company has expanded into various services, including insurance, asset management, and housing finance. In April, Shriram Transport Finance merged with Shriram City Union to form Shriram Finance Limited. It has a strong network presence in semi-urban and rural areas. The company’s headquarters is situated in Mumbai.
| 1-Year Return | 3-Year Return | 5-Year Return |
|---|---|---|
| 84.44% | 279.33% | 300.42% |
2. Punjab National Bank
Punjab National Bank In 1894, Lala Lajpat Rai, the Indian freedom fighter, founded the bank in Lahore, Pakistan. After independence, the bank’s headquarters were shifted to New Delhi. Later in 1969, the bank was nationalised along with 13 other banks. In 2020, it amalgamated with the United Bank of India and Oriental Bank of Commerce. The company is successfully catering for the needs of MSMEs, retail investors, and big companies.
| 1-Year Return | 3-Year Return | 5-Year Return |
|---|---|---|
| 34.10% | 124.88% | 245.28% |
3. ABB India Limited
ABB India Limited was founded in 1949 with the name Hindustan Electric Company Limited. However, the company was later renamed Hindustan Brown Boveri Limited in 1965. In 2013, the company was finally changed to ABB India Limited. The company issued its IPO in 1992. The company mainly deals with electrification, motion, robotics, etc, which is capital-intensive. It is headquartered in Karnataka.
| 1-Year Return | 3-Year Return | 5-Year Return |
|---|---|---|
| -19.08% | 71.19% | 286.75% |
4. Jindal Steel Limited
Jindal Steel Limited one of the major steel companies in India and a subsidiary of the Jindal group. O.P. Jindal established the company in 1979. The company produces and markets a variety of steel products, which also include steel, rails, coils, etc. Manufacturing facilities of the company are situated at various locations in other cities of India, i.e., Chhattisgarh, Odisha, Jharkhand, etc. The headquarters of the company is located in New Delhi.
| 1-Year Return | 3-Year Return | 5-Year Return |
|---|---|---|
| 18.50% | 70.74% | 247.51% |
5. Shree Cement Limited
In 1979, the Bangur family established Shree Cement in Ajmer. The company established its first manufacturing unit in Rajasthan. The company expanded both its geographic reach and its cement manufacturing capacity to meet the demands of the Indian infrastructure sector. In 2010, the company became the top cement manufacturer in India’s Northern Region. The company then established production plants in West Bengal, Bihar, Odisha, Jharkhand, and other parts of India. By acquiring Union Cement in 2018, the company began operations in the United Arab Emirates. The company has its headquarters in Kolkata.
| 1-Year Return | 3-Year Return | 5-Year Return |
|---|---|---|
| 11.06% | 14.16% | 11.34% |
6. SRF Limited
The company was incorporated in 1970, and initially was known as Shri Ram Fibres Limited and focused on nylon tyres and cord fabric. In the early 2000s, the company shifted its focus to chemicals and packaging films. Now SRF is serving various industries such as refrigeration, pharmaceuticals, agrochemicals, etc. The company directly benefits from manufacturing growth and chemical usage in different sectors. The headquarters of the company is situated in Gurugram.
| 1-Year Return | 3-Year Return | 5-Year Return |
|---|---|---|
| 21.13% | 37.51% | 151.48% |
7. The Phoenix Mills Limited
The Phoenix Mills Limited company was founded in 1905, and initially it was established as a textile manufacturing unit. Later in the 1990’s the company completely exited the textile industry and entered into real estate development. Over time, it has expanded its footprint into various cities such as Bengaluru, Lucknow, Chennai, Pune, etc., offering real-estate solutions like retail offices, residences. The company’s head office is situated in Mumbai.
| 1-Year Return | 3-Year Return | 5-Year Return |
|---|---|---|
| 21.41% | 158.67% | 368.36% |
8. JK Cement Limited
JK Cement was founded in 1975, and its manufacturing plant was established in Rajasthan with a capacity of around 0.3 tonnes per annum. Over time, it has become one of India’s leading cement suppliers, both in the grey and white cement segments. Later, the company established various manufacturing plants across the country. It offers products like cement, wall putty, chemicals, and other building-related materials. The company’s head office is situated in Kanpur, whereas its corporate office is situated in Gurugram.
| 1-Year Return | 3-Year Return | 5-Year Return |
|---|---|---|
| 31.47% | 97.40% | 154.16% |
9. Honeywell Automation India Limited
Honeywell Automation India Limited company initially came into existence as a joint venture between the Tata group and Honeywell International under the name Tata Process Control Private Limited. The company was later renamed to Tata Honeywell Limited. Following the acquisition of most of the company shares by Honeywell International Incorporated in the year 2004, it was renamed Honeywell Automation India Limited. The company offers a wide variety of products, such as automation and control systems to be used in industrial, commercial, and residential applications. The headquarters of the company is located in Pune.
| 1-Year Return | 3-Year Return | 5-Year Return |
|---|---|---|
| -16.76% | -15.74% | -18.57% |
10. Tata Chemicals Limited
Tata Chemicals Limited company was founded in 1939, and began its operation by establishing a soda ash plant. It has acquired many domestic and international companies to strengthen its market position. It started focusing on specialty products, consumer-facing brands. Currently, it has manufacturing units in different countries such as Europe, North America, Africa, etc. The company’s headquarters is situated in Mumbai.
| 1-Year Return | 3-Year Return | 5-Year Return |
|---|---|---|
| -19.76% | -21.74% | 39.46% |
Read Also: Best Consumption Stocks in India
Key Performance Indicators (KPIs)
The key performance indicators of the best cyclical stocks to buy in India are as follows:
| Company | ROE (%) | ROCE (%) | Operating Profit Margin (%) | Net Profit Margin (%) |
|---|---|---|---|---|
| Shriram Finance Limited | 16.91 | 17.30 | 70.28 | 22.86 |
| Punjab National Bank Limited | 14.80 | 1.49 | 29.18 | 14.06 |
| ABB India Limited | 26.45 | 35.54 | 20.75 | 15.35 |
| Jindal Steel and Power Limited | 5.95 | 9.94 | 13.85 | 5.73 |
| Shree Cement Limited | 5.21 | 6.67 | 7.86 | 5.82 |
| SRF Limited | 10.96 | 13.89 | 17.10 | 10.80 |
| The Phoenix Mills Limited | 9.42 | 10.36 | 52.06 | 34.12 |
| JK Cement Limited | 14.14 | 12.51 | 13.45 | 7.33 |
| Honeywell Automation India Limited | 12.96 | 17.17 | 17 | 12.49 |
| Tata Chemicals Limited | 1.08 | 3.33 | 7.08 | 1.56 |
Benefits of Investing in Cyclical Stocks
The key benefits of investing in cyclical stocks are as follows:
- High Returns: Cyclical stocks directly benefit from a country’s economic growth, as consumer spending increases during the economic growth cycle. This will lead to an increasing stock price.
- Valuation: When the economy of a country struggles, cyclical stocks also tend not to perform during such conditions, hence it can be a value buy during an economic downturn.
- Diversification: One can easily diversify their stock portfolio by investing in cyclical stocks, which can increase overall portfolio return during the growth phase of the economy.
Factors to Consider Before Investing in Cyclical Stocks
The key factors to consider before investing in cyclical stocks are as follows:
- Economy Stage: One must understand the economy phase and invest accordingly. Investments in cyclical stocks are suggested during the economic growth phase.
- Financial Performance: Analysing the financial performance of the cyclical stocks before investing is advisable. One must invest in cyclical stocks of companies which have strong growth potential and strong balance sheets.
- Government Regulations: Cyclical stocks are sometimes affected by the changes in government policies related to import, export, etc. Hence, favourable policies help cyclical stocks in the long run.
Read Also: Best Manufacturing Stocks in India
Future of Cyclical Stocks
The future of cyclical stocks looks very promising because of increasing demand in the consumption sector and increasing consumer spending. This sector is expected to grow at an average CAGR of 6-7% in the coming years. There are various initiatives by the Indian Government which will lead to an increase in the demand for cyclical stocks, such as PLI schemes and Make in India initiatives. Hence, one can invest in cyclical stocks to create wealth in the long run. To invest in cyclical stocks, you can open a lifetime free demat and trading account with Pocketful, as it also offers free brokerage on delivery trades.
Conclusion
To sum up, cyclical stocks are significant to the development of the Indian economy. These consist of the stocks of different industries such as banking, infrastructure, chemicals, etc. Increasing consumption, government spending etc is the major strength of such stocks. However, they can be volatile in the short term, but long term can lead to wealth generation. Before making any investment decision, however, it is advisable to consult your investment advisor.
Start your investing journey in cyclical stocks with Pocketful simple, seamless access to opportunities aligned with economic growth cycles.
Frequently Asked Questions (FAQs)
What do cyclical stocks mean?
Cyclical stocks refer to the shares of the company whose performance solely depends on the economic condition of the country. These stocks tend to perform well during economic growth and underperform during economic downturns.
Which sectors in India are considered cyclical in India?
In India, cyclical stocks belong to different sectors such as financial services, metal, chemical, automobiles, infrastructure, cement, etc.
What are the risks involved while investing in cyclical stocks?
The key risks involved while investing in cyclical stocks are lower earnings during economic downturns, rising interest rates, and increasing input costs.
Which is the best time to invest in cyclical stocks?
One can consider investing in cyclical stocks during an economic downturn, as the valuations of cyclical stocks are lower.
How to invest in cyclical stocks?
One can invest in cyclical stocks by opening a lifetime free demat account with Pocketful, as it also offers free brokerage on delivery trades, along with mobile applications equipped with advanced trading tools.
