The extension of lockdown will hit economic activity and earnings of India Inc in the upcoming June quarter, experts fear.
Global firms have already reduced their GDP forecast for FY22. Goldman Sachs and Nomura have cut their forecast for the fiscal year, which began on April 1.
Investors will be better off investing in stocks that are COVID-proof and should be able to show quarter-on-quarter (QoQ) growth.
“Pharma is in a clear uptrend and it is likely to perform, going forward as well, whereas auto is likely to see some bounce-back. Metals have been the star performer so far in the April series. However, most of them is priced in and it too can see some consolidation,” Jay Thakkar, VP and Head of Equity Research at Marwadi Shares and Finance Ltd.
“The FMCG sector, like that of pharma, is likely to perform well in the short to medium term. Pathology labs are likely to perform well in the short to medium term,” he said.
The Indian market is down by about 9 per cent from the highs, which factors in the partial lockdown in many states as well as slowdown in industrial activity and demand trends.
The ongoing slowdown is bound to impact the June quarter earnings, but on a YoY basis, the results will be strong. The impact will be visible on a sequential basis.
“The second wave is likely to peak by end-April and then show a steady decline, as many models suggest. For FY22, a GDP growth of 10 per cent is achievable,” Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services,
“Since 65 percent of Nifty earnings have global linkage, and segments like IT and metals are doing well, Q1 earnings will not be hit hard,” he said.
The vaccination drive will be opened up for all citizens above the age of 18 from May 1, the Union government announced on April 19. The immunisation drive was so far restricted to citizens aged above 45 years.
“Opening up of vaccines for everyone above 18 years of age brings in a huge positive sentiment among people. The government is also pushing up the manufacturing infrastructure. It has approved many other vaccines as well,” Divam Sharma, Co-founder, Green Portfolio
“The last 2-3 quarters of FY21 had reflected the strength of our country and its economy. Vaccination drive and lesser restrictions will lead to continuity in the double-digit GDP growth expectations and many listed businesses will continue to outperform, resulting in markets gaining further momentum,” he said.
We have collated a list of COVID-proof stocks from various experts:
Expert: Atish Matlawala, Sr Analyst, SSJ Finance & Securities
It should benefit from increasing demand for hospitalisation for COVID treatment.
With Russia’s Sputnik V vaccine getting emergency use approval from government of India, Dr Reddy will benefit as it will import and sell Sputnik V in India.
A sharp spike in COVID-19 infections has increased the demand for diagnostic and healthcare tests and services of Dr Lal PathLabs Ltd. Thus, we believe that in the short-term, it can give good returns.
Expert: Divam Sharma, Co-founder at Green Portfolio
The vaccination drive will help lift travel restrictions and regain sentiments for the travel industry. Thomas Cook, backed by the Fairfax group, is a leading player in travel and related services in India.
This industry has consolidated in the past 1.5 years. This company has a strong balance sheet and cash position and will hugely benefit from the rise in travel demand, post the vaccination drive.
The power sector will see renewed demand from a rise in manufacturing activities and consumer sentiments.
Transforming portfolio into renewable segment in line with government initiatives, 100 per cent capacity tied up with long-term PPA and assured coal supply, strong balance sheet, and improving profitability with strong parent support are among the company’s key positives.
The company offers nutrition and personal care solutions, along with other industrial use chemical solutions.They will benefit from consumer sentiments and greater emphasis on healthcare and rise in manufacturing activities. It recently demerged from erstwhile Jubilant Lifesciences Ltd. The stock is available at a PE of about 17, which is very lucrative for such a group.