With the markets
at an all-time high amid global and local uncertainties that lie ahead, investors seem to be gradually allocating more money towards classical defensive plays such as pharmaceuticals (pharma), information technology (IT) and fast moving consumer goods stocks.
“Investors who have made money in sectors like banks, automobiles and consumer goods are now turning to defensives. That apart, the fall in the rupee to record low against the US dollar
is propping up sentiment in the IT
sectors,” explains G Chokkalingam, founder and managing director at Equinomics Research.
Thus far in calendar year 2018 (CY18), the Nifty IT
and Nifty FMCG
indices have outperformed the Nifty50 by gaining around 31 per cent and 21 per cent respectively, as compared to 10 per cent rise in the benchmark index. The Nifty Pharma
index, too, has moved up nearly 5 per cent during this period, ACE Equity data show.
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Besides forecast of a normal monsoon
in FY19, the absence of disruptive events (like demonetisation or the goods and services tax), higher minimum support price for kharif crops, price hikes by manufacturers to pass on the rise in raw material costs and the government’s focus on rural India ahead of elections are some of the factors, analysts say, lend confidence about a pick-up in rural growth. This, they believe, augurs well for the FMCG
/ consumption related stocks. That said, they do caution against the rich valuations of some of these counters.
“Our preference is more for potential turnaround set of companies on improving fundamentals going into FY19 i.e., ITC, Dabur and Nestle where we have a buy recommendation. We still remain on the side-lines and less convinced with risk-reward on Marico, Emami, Colgate
and United Spirits.
Within discretionary space, Asian Paints
and Jubilant FoodWorks
remain a buy rated while Titan is a hold on less compelling risk-reward," write Varun Lohchab and Tanmay Sharma of Jefferies in a recent report.
As regards IT
stocks, analysts remain bullish on the road ahead given that the rupee is near all-time low against the US dollar.
companies giving a positive commentary on growth and pricing pressures easing in the pharma
sector, stocks from these sectors may see further upside. Investors should buy stocks where valuations are not too stretched and growth potential is visible. We prefer Sun Pharma
and Cipla from the pharma
space from a long-term perspective,” says Hemang Jani, head of advisory at Sharekhan by BNP Paribas.
In August, the Nifty FMCG and Nifty IT indices gained around 5% each compared to 2% rise in the Nifty50 index
The Nifty Pharma index moved up nearly 10% during this period to hit its 52-week high of 10,142 last week
In calendar year18, the Nifty IT and Nifty FMCG indices outperformed the Nifty50 by gaining around 31% and 21% respectively
Individual stocks such as Sun Pharma, Cipla, Nestle, Britannia, Godrej Consumer, Dabur and GlaxoSmithkline hit their respective new highs last week