Consumption, infra, telecom stocks might be a smart choice as unlock 1.0 could benefit in short to mid-term. Stocks including cement, metal, and capital goods might generate good returns, suggest experts.
D-Street ignored most of the bad news last week and climbed above crucial resistance levels as the journey to opening up of economy begun. The S&P BSE Sensex reclaimed 34,000 while the Nifty50 climbed 10,100 levels.
The government through an order dated May 30, provided a detailed phase-wise opening up of the economy, although the lockdown has been extended till June 30 in containment zones.
Details of various phases:
Phase 1: From June 8, all hotels, restaurants, shopping malls, and religious places of worship open.
Frequently Asked Questions
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.
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.
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.
Phase 2: Schools, colleges, coaching, and training institutions to open based on the feedback of state governments/union territories.
Phase 3: International air travel, metro rail, cinema halls, gymnasium, swimming pools, entertainment parks, theatres, bars and auditoriums, assembly halls, and similar places would open post discussion with state governments. No fixed timeline has been set for the same.
After going through a two-month lockdown, the economic activity virtually came to a standstill, but with easing of lockdown rules, the economic activity should revive, suggest experts. Sectors such as consumption, retail, telecom as well as consumer durable could see revival in sales, they said.
“Sectors such as consumer durables have witnessed pent up demand such as coolers, fans, ACs which has also been supported by hot weather across northern parts of the country thus fueled a rally in stocks like Symphony, Voltas. Apparels & shoes have also seen pent up demand supporting stocks like Relaxo or Bata,” Paras Bothra, President of Equity Research, Ashika Stock Broking told Moneycontrol.
“Also pent-up demand could be seen in mobile phones, TV and more specifically in small ticket discretionary items. Once malls are gradually opened, sales will normalise. Apart from the same, higher consumer durables will be reflected in consumer finance stocks as well,” he said.
Infrastructure related stocks might be a smart choice as unlock 1.0 could benefit in short to mid-term. Stocks including cement, metal, and capital goods might generate good returns, suggest experts.
“In the infrastructure and construction space, we like L&T, UltraTech Cement, JSW Steel, and Siemens that are placed at attractive valuations, and risk and reward are in favor of investors. We can see revival in metal and cement sector as demand might come to track,” Gaurav Garg, Head of Research at CapitalVia Global Research Limited – Investment Advisor told Moneycontrol.
The current rally is largely driven by liquidity flows. No doubt there are positive developments on the domestic front as well. Experts say that positive comments from some of the consumption companies and normal monsoon forecast have lifted sentiments.
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On the domestic front, while the lockdown restrictions have eased, the number of cases continues to surge which is currently ignored by market participants. The trade might remain rangebound in benchmark indices but there are plenty of stock-specific opportunities that investors could look at.
“We believe sectors such as Consumers, Healthcare, and Telecom were less impacted during the lockdown. Further, with easing of lockdown and unlock-1 coming to effect, we would continue to see healthy buying interest for products in the same space, due to an increase in demand and more importantly supply getting back on track,” Ajit Mishra, VP Research, Religare Broking told Moneycontrol.
“Other sectors would benefit too but these sectors are likely to bounce back immediately and benefit far more as compared to others. We would recommend stocks such as HUL, Bharti Airtel, Britannia, Cipla, Biocon, and Dabur,” he said.
Domestic brokerage firm Motilal Oswal expects the governments (Central & State) to progressively keep relaxing the lockdown norms further.
“MOFSL Universe stocks to see a positive impact from relaxation – Jubilant FoodWorks, Titan Company, Page Industries, Aditya Birla Fashion, Trent, Avenue Supermarts, Phoenix Mills, Brigade Enterprises and Indian Hotels.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.