ETMarkets Survey: Chemicals, pharma, telcos, agri-inputs now top sectoral bets on D-Street

BSE Healthcare and BSE Telecom indices have been the best performers so far this year.

On a year to date basis, BSE Bankex has been the worst hit sectoral index, eroding around one-third of its value.
Mumbai: Covid-19 has changed the pecking order on Dalal Street altogether: some sectors have gone out of fashion, some emerged new leaders, and a few others promise to shine in the near to medium term.

In a survey conducted by among a dozen brokerages, analysts said they were mostly betting on chemicals, pharma, telecom, metals, consumption and agri-linked stocks to emerge new leaders in the months ahead.

On a year to date basis, BSE Bankex has been the worst hit sectoral index, eroding around one-third of its value. Metals, Realty, Consumer Goods, Consumer Durables, Auto and Oil & Gas indices have shed between 30 per cent and 13.25 per cent during this period.

BSE Healthcare and BSE Telecom indices have been the best performers so far this year, up 21.81 per cent and 18.34 per cent, respectively. BSE FMCG index is down 3.68 per cent and the IT index 1.23 per cent.

Consumption, agri-based, chemicals, IT and pharma may lead the next rally when the economy starts reviving, says Siddharth Sedani, vice president, equity advisory, Anand Rathi Shares and Stock Brokers.

“All these sectors went through a long bad patch over the past few years and can be good revival bets both in terms of business prospects and price action,” he said.

The Covid-19 crisis, border tensions between India and China and the tightening of environmental norms in China have created good conditions for India's chemicals sector to advantage of.

Telecom and pharma, which were facing a lot of trouble over the past few years, have become the centre of attraction on Dalal Street since the Covid-19 crisis.

Auto is another beaten-down space which seems to be finding favour again. Once a top wealth creator, auto stocks have been facing tough times over the last two years.
Umesh Mehta, Head of Research at Samco Securities, said a few sectors should see comparatively quicker rebound from their current cyclical lows. They will also benefit from any government stimulus in the form of a GST cut and the much-awaited scrappage policy.

Mehta said the chemicals firms may also report good numbers given the safeguard duties to protect Indian industries and other products manufactured in India.

“With supply from China to other parts of the world are facing backlash, India could step in as a good substitute to meet the world’s demand be it steel, tyres pharma or chemicals,” he said.

Mehta is also upbeat on metal stock, which were also on a decline. He said to get out of the recessionary rut, India will need to increase manufacturing and boost infra spending.

“Metals will hence play a big part in revival of the economy and so will the stock prices,” he added.

Deepak Jasani, head-retail research, HDFC Securities placed his bets on agri based-industries - seeds, fertilisers, agrochemicals on the back of a expectations of a healthy monsoon .

The Indian Meteorological Department (IMD) has forecast the south-west monsoon to be at 102 per cent of the long period average (LPA) in 2020 with rains expected to be well-distributed at 96-107 per cent of the LPA in all the four regions.

He is also relatively bullish on sectors such as pharma, cement and telecom.

Rusmik Oza, head of fundamental research, Kotak Securities said he liked some of the economy-linked sectors that have been beaten down heavily such as capital goods, construction, utilities, metals and oil & gas.

He was of the while that while most of these economy related sectors will report very poor numbers in FY21 due to Covid-19 and lockdown, the low base and recovery in the economy will lead to very high growth in FY22 earnings.

“Hence from a FY22 perspective most of these economy related sectors look attractive. BFSI stocks have grossly underperformed the market in the recent rally due to uncertainties associated with the sector. In any sharp market correction one can look at the larger banks and NBFC stocks,” Oza added.

Naveen Kulkarni, Chief Investment Officer, Axis Securities is bullish on telecom, pharmaceuticals, IT, consumer staples, rural and small ticket consumer discretionary.

He believes telecom and Pharma will continue to perform even in the current quarter, while IT is likely to see a very fast recovery.

“Rural is not much impacted and could see good growth on back of good monsoon while Consumer staples and small ticket consumer discretionary is likely to gain traction in the forthcoming quarters,” said Kulkarni.

Vinod Nair, head of research at Geojit Financial Services is upbeat on the prospects on chemicals, pharma, FMCG and IT due to good and stable domestic as well as international demand.

Hemang Jani, head equity strategist, broking & distribution, Motilal Oswal Financial Services said that post he Covid-19 pandemic, some of the sectors he is bullish on are telecom, healthcare, specialty chemicals, banking and financial services while one can look at rural consumer space as a recovery play.




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