The market returned to record high levels on November 9 after a break of nearly ten months due to COVID-19 crisis. On November 10, the benchmark indices further extended gains with Sensex scaling the 43,000- mark intraday and Nifty above 12,500 in morning trade.
COVID-led crisis dented sentiment and as a result the market touched an over four-year low in March. The market started to recover after Unlock process.
The confidence in the market was led by improving economic data points, better-than-expected September quarter earnings, which gives hope for strong earnings in FY22, consistent liquidity flow (domestic as well as foreign) and clear majority of Democratic Party in the United States with Joe Biden becoming 46th President of the world’s largest economy.
The recovery from March lows is seen across sectors, but the wealth creator sectors during the period of last record high to current record high were only three – Healthcare (up 40 percent), Information Technology (up 38 percent) and Energy (up 17 percent).
After five-year of underperformance, the healthcare sector was back in action given the widespread COVID-19 pandemic.
Given the supply constraints, initially the IT index also crumbled in line with markets, but immediately picked up pace as supply issue was not a big concern. In fact, the demand for digitalisation and automation increased significantly during the lockdown process across the globe. Hence, the IT index jumped 38 percent during record high periods (January 20, 2020 -November 9, 2020).
The BSE Energy was the third biggest gainer in same period with 17 percent gains but that was majorly led by Reliance Industries. And for RIL, the Jio and Reliance Retail boosted the actual stock performance, especially after several investment deals with global investors for telecom and retail businesses.
Majority of investors advised to hold IT and Pharma in a portfolio as a defensive bets, though there was some amount of profit booking as stocks turned expensive, along with select cyclicals as the economic recovery is largely expected from second half of FY21.
“While we remain bullish on IT and Pharma, we have reduced positions as valuations have become a bit stretched after the sharp outperformance of the past 6 months. Overall the themes remain the same i.e. consumption revival, exporters and make-in-India plays. However, most of these have already become market favourites, which is reflecting in high valuations, we are hence trimming by booking profits and keeping some cash in the portfolio,” Mihir Vora, Director and Chief Investment Officer at Max Life Insurance told Moneycontrol.
Jyoti Roy, DVP- Equity Strategist at Angel Broking expects both cyclical and defensive sector will continue to do well.
“Going forward we expect the broader markets will do well as compared to the benchmarks and within broader markets cyclical should do well given revival in earnings in FY22. We also expect sectors with revenue visibility will continue to do well. We expect sectors like Agrochemicals, chemicals, two wheelers and tractors along with IT and Pharma will continue to do well given strong growth dynamics,” he explained.
On the other hand, the realty sector was the biggest loser from last record high, followed by Metal, Oil & Gas, Capital Goods, Banks, Power, FMCG and Auto sectors, which fell in the range of 3-27 percent, though all sectors rebounded sharply from March lows with double digit gains.
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