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IT, pharma & FMCG sectors to do well if COVID restrictions are tightened: Nilesh Shah of Kotak AMC

If investing for the long term, assuming COVID cases will come under control, buy on dips is the correct strategy, says Nilesh Shah.

April 12, 2021 / 01:20 PM IST
Nilesh Shah

Nilesh Shah

Rising coronavirus cases and fears of a lockdown led to a knee-jerk reaction on D-Street on April 12, pushing the Sensex and the Nifty below crucial support levels. If the restrictions get extended to states other than Maharashtra, the trade will shift to defensives, Nilesh Shah, Managing Director, Kotak AMC, said in an interview with CNBC-TV18.

“If the economy goes into a lockdown-like scenario then defensives like IT, pharma, and FMCG will do well and, if economic momentum continues, then cyclical are likely to do well,” says Shah.

Maharashtra, which accounts for around 13 percent of India's GDP, has been recording the highest number of coronavirus cases in the country for days, with state capital and the country's financial hub Mumbai among the worst-hit cities. The state government has already imposed a string of restrictions and may go for a lockdown as the healthcare system comes under severe strain.

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India hit a new coronavirus infection record with 1,68,912 new cases, the highest single-day rise so far, taking the total tally of cases to 1,35,27,717, according to the latest Union Health Ministry data.

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COVID-19 Vaccine

Frequently Asked Questions

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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Commenting on broader markets, Shah is of the view that even though there was a sharp run-up in the broader market space, for the long-term, assuming COVID cases would come under control, investors should put money in this correction.

Also read:  Sensex, Nifty crack up to 3%; 5 factors that are spooking investors

The market is factoring in the impact of possible lockdown in various parts of the country on the June quarter results. The lockdown-like scenario will not impact March quarter results but management commentary would be eyed.

Also read: What to shop after sharp Sensex fall: 8 buy ideas from experts

History suggests that organised players have done well post the lockdown as compared to the unorganised sector. Hence, largecap companies or sectoral leaders could benefit the most post the lockdown.

“Market is trying to guess what could be the impact of lockdown on June quarter numbers and trying to take a correction. Post-lockdown, listed companies or organised sector does far better than unorganised sector,” says Shah.

Follow our full coverage of the coronavirus pandemic here.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Moneycontrol News
first published: Apr 12, 2021 01:20 pm

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