The Indian market has recovered more than 30 percent from the lows recorded on March 24 but we are still in a bear market. In the past, it was noted that stocks from sectors such as consumption and IT bounced back after falling during bear market.
Since COVID-19 has brought lives at the brink of a change there will be a new normal in the world. So does that mean the list of defensives could be different in 2020?
Comparing 2008-09 and 2020, market corrections in both eras were severe and the similarities end there. The reasons for the market correction in 2008-09 were different from what they are today.
The 2008-09 market correction had its genesis in banking and its excesses while the 2020 fall is due to a medical problem and its aftermath, say experts.
“Probably work from home would become a new normal and people would prefer to travel in their own vehicles, shunning public transport, which could increase demand for passenger vehicles,” he said.
He further added that with WFH, or work from home, becoming a new normal, demand for consumer durables would be higher, and accordingly, the focus would shift depending on the earnings growth trajectory.
Deepak Jasani, Head Retail Research, HDFC Securities said that if we look at the past large falls, sectors that got hammered badly in the fall start to recover the most.
“Hence, cyclical sectors like metals, realty, power, oil & gas, PSU and some defensives like pharma did well in the up move in the past post formation of a long-term bottom. In 2020 we have to add financials to that list,” he said.
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