Despite the large economic impact of the Covid-19 pandemic, the
markets have recovered sharply even though the performance among individual
stocks has been quite polarized.
After a 52 per
cent rally in the benchmark indices – the S&P
BSE Sensex and the Nifty 50 – form their respective March 2020 lows led by
pharmaceutical, automobiles, information technology (IT) sectors and index
heavyweight Reliance Industries (RIL), analysts now suggest investors should
now rotate money to cyclical plays like banks and cement as the economic
activity picks up pace.
"As the
market repositions itself for the normalization of the economy, analysts at
CLSA believe that core domestic sectors should start outperforming the global
defensives like IT and pharma," wrote Vikash Kumar Jain, an investment
analyst at CLSA in an October 16 note.
Despite the large
economic impact of the Covid-19 pandemic, the markets have recovered sharply
even though the performance among individual stocks has been quite polarized.
For instance, sectors which are seen as Covid-19 resistant, such as pharma and
IT have been market leaders. Nifty IT and Nifty Pharma indices have moved up 80
per cent and 75 per cent, respectively from their March 2020 low, ACE Equity
data show. In comparison, the Nifty50 index has gained 52 per cent.
At the other end
of the spectrum are Nifty
PSU Bank, Nifty Bank, Nifty FMCG and Nifty Realty indices that have been
relative laggards, and moved up 1 per cent to 45 per cent during this period,
data show.
"This polarization
is also evident from the fact that only 15 per cent of this universe of
Covid-19-impacted stocks are above pre-Covid-19 levels versus a much larger
around 70 per cent of the Covid-19 resilient names which have surpassed their
respective pre-Covid-19 stock prices," Jain of CLSA wrote.
As an investment
strategy, those at Credit Suisse Wealth Management, too, share a similar view
and suggest investors increase exposure to private banks from a 12 – 18-month
horizon.
No comments:
Post a Comment