The benchmark indices are down 5 per cent for the year despite an 11
per cent rally in March alone. In this backdrop, investors usually look for traditional sectors like pharma, FMCG and
IT to hide until the next leg-up. Only that these sectors are on the backfoot this time around.
"At the moment,
there are not many sectors to take shelter in this market," said Andrew Holland, CEO, Ambit Investment Advisors, who oversees
assets worth $100 million.
"We have been quite negative on the pharma sector, partly because of the regulatory problems
from the US, which will have a bigger impact on a number of companies. The IT sector is going to suffer from low growth.
And in consumer goods, the recent pickup in commodity prices will impact margins. So there is no margin cushion anymore for
the consumer goods companies," he said.
The pharma, IT and consumer goods sectors are traditionally known to be the
three defensive sectors in the stock market as they fall lesser when the market falls and gain lesser when the market gains.
They are preferred for their risk management profiles in a portfolio.
Andrew Holland's claims may seem right in
the light of the performance put up by these three sectors in the year so far. The BSE Healthcare index, a gauge of pharma
companies on the BSE, has slumped 17 per cent on a YTD basis, which is far more than the fall in the Sensex.
Similarly, the BSE FMCG index has slipped 8.43 per cent in the same period despite the positive news flow regarding the
benefits from the implementation of the Seventh Pay Commission, OROP and Budget allocations towards the rural sector.
"I think in the FMCG space people are still pricing in very high growth numbers. In a scenario where
inflation is low, a lot of the pricing power may not be there as it used to be in the past. Therefore, the 20 per cent kind
of growth that people are looking at may not materialise. If the growth numbers were to be lower, then you could see some
disappointment coming in over there," said Rajeev Thakkar, CIO at Parag Parikh Financial Advisory Services Mutual Fund, who
oversees assets worth Rs 650 crore.
The BSE IT index, a gauge of information technology-related stocks on
the BSE, has performed relatively better, down by just 1.3 per cent.
"In the IT space,
a big churn is going on. Cloud is a big thing now, so is social media and analytics. The traditional application development
and maintenance space is not the high growth area anymore," said Rajeev Thakkar.
"Thus the three sectors you
would typical like to take shelter in a difficult market are not showing great prospects," said Andrew Holland.
For him, "it is a difficult time to be overly positive on any one sector" as there are either regulatory or global headwinds facing most sectors.
The original article could be seen here.
