Is it right to assume that banks would gain more during high inflation as other sectors may not post good results due to poor GDP and high interest rates?

Actually, banks suffer a lot during phases of high inflation.

Banks are very closely connected to the economy of the country and what is bad for the economy is usually bad for banks too.

Higher rates and a slowing economy means slower credit growth and more NPAs for the banking sector.

I can't think of any sector that is completely immune to inflation.

When interest rates are increased, demand in the economy suffers and more or less every sector is negatively affected by this.

Besides a decrease in demand, increase in input costs is also a problem.

Exporters rely on global demand, but high inflation can significantly increase raw material costs and labour costs for them.

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Banks are hit hard during periods of high inflation/poor GDP and high interest rates. (because banks like any other sector borrow money/take loans from either other banks or the RBI.) and higher borrowing costs means reduced net interest margins (unless they pass it on to those who borrow from the banks).
These sectors are called cyclical sectors. They include
1) Basic Materials
2) Capital Goods
3) Communications
4) Consumer Cyclical
5) Energy
6) Financial
7) Health Care
8) Technology
9) Transportation
(Stock Sectors - Using Stock Sectors to Categorize Stocks)

The sectors which you have asked about are called defensive sectors.
They include
1) Utilities
2) Consumer staples/Non durables (Some of the FMCG and the like)
3) Healthcare/Pharmaceuticals
(Only if the stocks from these three sectors don't have significant debt)

Business Line : Markets / Stock Markets : Pharma, FMCG funds top returns chart in May

In the above list, Pharma/Healthcare is listed in both defensive and cyclical but I personally consider it defensive. The reasoning is pretty simple - If someones friend/relative has met with an accident/has a heart attack or something, one won't wait for the recession/inflation/high interest rates to end. One would take him to the hospital/give medicines at any cost. So goes for drugs (pharma) for high blood pressure, diabetes mellitus etc.

As for consumer staples - You would use toothpaste (Colgate etc) or shave (Gillette etc) or use soaps no matter what the interest rates/inflation is. They are the basic necessities, so goes for electricity (Utilities), though you may cut down your AC usage or something like that, you would still have to use electricity (and other utilities).

Note - Though these sectors are considered defensive, their stock prices may not reflect the same. If there is a bear market almost all the sectors stock prices are more or less affected. This is because the index has a "pull effect" and most of the stocks (close to 75% or so) are "pulled down" by the index.

Instead, if you predict a recession etc, its better to invest in gold because it, for the most part, has a negative correlation with equity (stocks).

Inflation kills purchasing power.

When interest rates are negative in real terms (lower than inflation), cash is a bad investment except for short periods of time.

Equities and Real estate apart from certain precious metals/commodities can give you positive returns in real terms.

Companies that will outperform in a period of high inflation are those with:

1. None or negligible debt.

2. Companies with consistently high ROE and free Cash flows.

3. Good Pricing Power due to reputation/brand value.

4. Secular Volume growth meaning,the companies that sell necessary items like food, medical supplies and household essentials (also companies which sell addictive products like liquor,cigarettes can be hiding places).

5. After getting beaten down the cyclical stocks tend to bounce back very sharply (sometimes 2-5 times from their lows) so don't ignore them completely.

Avoid index watching, it will just paralyze you as an investor,, instead evaluate stocks on individual merit.

Returns depend upon the price you pay,so be patient and buy stocks when you feel they offer significant potential.

Can you / some senior members please guide how to identify the price that offers significant potential ?

Value can't be defined, it is relative.

Price comes later, first you will need to understand the business.

Once you Know your Company, then you look at what sets it apart (MOAT).

Then you look at the scalability of the business and whether the company can achieve profitable growth,preferably without any dilution or massive debt and generate respectable ROE's.

How does the company fare during an economic downturn,are the earnings consistent or volatile ?

What kind of entry barriers will new entrants have?

Is the Balance sheet clean?

Management quality/integrity is of paramount importance too.

After you have an assessment of the business itself,the simplest way would be to look at the market capitalization of the stock.

If you feel the market cap of the company does not reflect its future potential,then by all means go ahead and invest.

There are many valuation metrics like PEG, DCF, Sum of the parts etc. that you can use.

There are many books on the stock valuation, I would suggest you read as many as you can and take what ever you feel is relevant and make your own benchmarks of valuation and become a conviction investor who actually knows why he owns the stock.

"The list of qualities [an investor ought to have] include patience, self-reliance, common sense, a tolerance for pain, open-mindedness, detachment, persistence, humility, flexibility, a willingness to do independent research, an equal willingness to admit mistakes, and the ability to ignore general panic." - Peter Lynch

because people then run for precious metals as a safe haven. But also to mention is that climbing oil prices are a factor too. So to the more conservative investment could be gold and silver coins. They are the classic hedge against inflation.