Stock Market Predictions for 2012

Stock Market Predictions for 2012

Predicting the stock market is perhaps the most difficult job in the world. Even experienced traders and investors have been left completely surprised with sudden and unexpected moves in the market. However, stock market predictions for 2012 can help you to chalk out investment strategies and earn fast bucks...
WealthHow Staff
If you go through any business newspaper, magazine or website, you will notice some 'buy' or 'sell' recommendations from stock brokerage houses or independent capital market analysts. Can you believe in these suggestions? Will they always give handsome returns? These are some of the biggest questions in the minds of thousands of investors. The answer to these questions is that though some predictions can be true, some stocks might not give you profits. After all, it is their individual opinion, which always comes with a disclaimer. So my suggestion would be that you should definitely go through such suggestions and at the same time engage in your own research, to minimize your risk.

Stock Predictions for 2012

Information Technology
Outlook: Positive
Valuations: Attractive
Percentage of return expected in a year: 10-15%
Suggested Action: Buy at lower levels

The information technology sector is the best one for investment with a one to two years time horizon right now. The sector underperformed in the markets during the time of the recession. However, things have changed with an increase in demand for the services provided by software majors. The business is expanding, profit margins are improving and hiring is in full swing. Hence, the overall outlook of the sector is positive and buying stocks of large cap companies with a strong balance sheet can give ten to fifteen percent returns. My suggestion is to book profits, after getting a decent appreciation.

Banking and Financial Services
Outlook: Neutral
Valuations: Not So Attractive
Percentage of return expected in a year: 10-16%
Suggested Action: Buy select finance and banking stocks, with solid financial fundamentals that fall in large cap category.

While giving stock market predictions and tips, it is important to discuss the banking and financial services sector, which is the backbone of the economy. Banking and finance stocks are available at low price-to-earning ratios and hence are valuable buys at the current levels. Ideally, you should invest in stocks of multinational financial corporations for higher returns and attractive dividends. Banking stocks are very stable and can hold on even in a slightly bad market, and hence they maintain your total portfolio value. They key is to buy at lower levels and book your profits at the right time, without being too greedy. However, in 2012, as the financial world goes through recession, it's necessary that you be very cautious with your investments in the finance sector.

Consumer Goods
Outlook: Very Positive
Valuations: Attractive in some cases
Percentage of return expected in a year: 10-17%
Suggested Action: Buy quality stocks and sell on a rally

The consumer goods sector is a good one to invest for retail investors. These companies manufacture goods which are useful in day-to-day life and hence the sales volumes are expected to be high. With the job market booming again and rising incomes, these companies will be the direct beneficiary. My suggestion here would be to sell the stocks after a good rally and invest somewhere else for more profits.

Power Generation
Outlook: Quite Positive
Valuations: Attractive
Percentage of return expected in a year: 10-15%
Suggested Action: Buy large caps only

Whatever may be the situation of the economy, the power sector will definitely do well. There are many giants in this sector and hence you can buy selectively. This can be a defensive sector when the other stocks in the market are crashing. However, this is a capital-intensive business and hence you might not get the kind of returns you get in other sectors here. However, being a safe bet, you can add some stocks from this sector to your portfolio.

Engineering & Technology

Outlook:Positive
Valuations: Attractive
Percentage of return expected in a year: 10-20%
Suggested Action: Go for stocks with good future growth potential

The engineering and technology sector has always stayed in vogue. Stocks like Apple and various other computer hardware companies like Intel and Dell, will continue performing well in 2012. Look for mid cap and large cap stocks, which haven't attained their 'true' value yet and have growth opportunities in the near future.

Healthcare & Pharmaceuticals

Outlook:Extremely Positive
Valuations: Attractive
Percentage of return expected in a year: 10-15%
Suggested Action: Go for large cap pharmaceutical stocks

Come what may, the demand for better health care and effective medicines or vaccines is never going to abate. Pharmaceutical companies and healthcare providers are expected to do well in 2012 and investing in some of the best companies like Pfizer makes abundant sense.

So, these were my financial predictions for 2012, for the capital markets. Along with the above stock market predictions for this year, you should also consult experts, track counters daily and invest partly in stocks to get maximum benefits. So, all the best for your trades and do well!