Where to take cover on D-Street as volatility leaves investors dizzy?

NEW DELHI: Wild moves on Dalal Street have left investors rushing for cover into pharma and FMCG names, often considered defensive bets against the fluctuations in global macros. Attractive valuations, strong sales expectations and favourable risk-reward scenario is already drawing smart money to these sectors.

Nifty Pharma and FMCG were among the three sectoral indices that logged gains in the last one month, rising 3.5% and 0.5%, respectively. Nifty50 lost 2%.

Analysts believe with market volatility expected to persist as the Fed rate hike scenario and recession fears loom, investors can consider adding weightage to defensives like pharma and FMCG stocks.

“Markets have not discounted a sharp and long recession in the US. If that scenario pans out, the market may witness sharp drawdowns. Thus, it would be better to partly move into pharma and FMCG,” said Dr V K Vijayakumar, Chief Investment Strategist,


Foreign portfolio investors pumped in Rs 2,765 crore in FMCG stocks in September, the highest inflows last month, while they bought healthcare stocks worth Rs 1,833 crore.

Rajat Sharma, CEO, Sana Securities, told ET NOW that pharma and FMCG are the two spaces which in this overvalued market are still available really cheap.

“I am definitely suggesting adding stocks in both these sectors. Both pharma and FMCG are not impacted by interest rate hikes and if inflation gets under control, which is clearly the mandate of the RBI, then a lot of the products that they make will come within the reach of their end consumers,” Sharma added.

Analysts believe the worst for both these sectors is over and now they can only surprise on the upside.

“If someone is having an investment horizon of 12-15 months, the risk-reward for pharma and FMCG sectors is very favourable. The near-term underperformance is likely amid inflationary environment and supply chain restrictions, but it is already reflected in valuations. From a valuation perspective, they are very lucrative,” said Sanjeev Hota – Vice President – Head of Research at Sharekhan.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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