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These 5 sectors to lead next rally on D-St after Covid-19 fall; keep a watch

An intermittent rally in sectors like insurance, industrial gases & fuels and retail could be possible as the advance-decline ratio of these sectors is greater than or equal to 0.50 on MoM basis.

March 20, 2020 / 10:42 AM IST

The Indian market has fallen about 30 percent from its record high of 12,140 registered on January 20, and a large part of the fall could be attributed to the global sell-off amid signs of economic slowdown due to the rise in Coronavirus cases across the globe.

Factoring the worst, Morgan Stanley in a note on March 17, warned investors that the seismic waves of COVID-19 are likely to trigger a global recession. S&P Global in a note said that the coronavirus outbreak has plunged the world's economy into a global recession.

At a time when the global economy is going through a recession, India Inc. is likely to face a rub-off effect which will in turn impact demand and earnings.

Some brokerage firms are already discounting a double-digit earnings cut in low teens while some sectors are likely to get positively impacted by the Covid-19 outbreak.

Coronavirus is having a major impact on the global economy and the stock markets across the globe. India is among the top 15 economies which are most affected due to this pandemic.

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The positive side for the Indian economy is the significant correction in the crude oil prices as India imports 85% of its oil needs which is the silver lining, suggest experts. Sectors that are defensive in nature as well as focused towards consumption are likely to do well along with insurance sectors.

“An intermittent rally in sectors like insurance, industrial gases & fuels and retail could be possible as the advance-decline ratio of these sectors is greater than or equal to 0.50 on MoM basis,” Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor told Moneycontrol.

“This implies that most of the stocks in the above-mentioned sectors are still considered to be bullish and hold the potential to generate good returns in the near future as per investor’s sentiments,” he said.

We also spoke to various experts on sectors which are likely to drive next leg of the rally in the market as and when dust settles:

Expert: Ajit Mishra, VP Research, Religare Broking

After a significant correction and high volatility in the Indian markets, we would advise investors to invest in defensive sectors like Consumer Durables, Paints and Pharma Space as they would be first amongst other sectors that would witness a reversal, with recovery in the markets.

Banking/NBFCs:

Also investing in large private Banking/NBFC would be considered as a safe bet. Going forward, in the medium to long-term we expect a recovery in the FMCG/ Consumer Durables sectors with improvement in the overall economy and uptick in demand.

Paint:

The Paints sector would benefit from lower crude oil prices and recovery in the consumption cycle.

Pharma:

Pharma counters are expected to be immune to the economic slowdown and we believe these counters have been in focus post the virus breakout.

Expert: Ritesh Asher – Chief Strategy Officer (CSO) at KIFS Trade Capital

FMCG:

We have a strong bet for the FMCG sector as this sector stand to gain from the slide in crude prices since many companies use oil and its derivatives in their products.

Demand will surge especially on a day to day essentials consumer products as they have high growth potential and with ongoing health circumstances, people will invest more in hygiene products.

Insurance sector:

The Indian life insurance industry has evolved in the last two decades post privatization of the industry in 2000. While growth has been aided by strong capital markets, there have also been interim setbacks in the form of regulatory changes. The private players have shown healthy growth since 2014.

Going forward, insurers are well poised to maximize the long term growth potential of the industry on the back of a stable regulatory environment, favorable demographics and increasing digital adoption by the customers.

These are few factors outlining the same as changing demographic profile & low insurance penetration. Keeping these factors in mind insurance industry have big scope in coming fiscal years and currently looking at fundamentals many stocks are available at attractive valuations.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Kshitij Anand is the Editor Markets at Moneycontrol.

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