The Indian market has fallen about 30% 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.
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 are greater than or equal to 0.50 on MoM basis.
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 the dust settles:
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.
- FMCG:
We
have a strong bet for the FMCG sector as this the sector stands 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.
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
the 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
the mind insurance industry has a big scope in the coming fiscal years and
currently looking at fundamentals many stocks are available at attractive
valuations.
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