IT, FMCG, auto, metal stocks shine in claw-back

The S&P BSE Sensex has regained nearly 2,400 points, or 7.3 per cent, from its recent low of March 23, to reclaim 35,000-levels in intraday deals on Friday.

The index, however, trimmed gains to end at 34,970, up 0.7 per cent or 256 points.

Stocks from the metal, information technology (IT), fast moving consumer goods (FMCG) and automobile sectors have been among the top performers during the Sensex's 2,374-point rally since the March low.

While Hindustan Unilever, Nestle India, Dabur India and Britannia Industries from the FMCG sector have rallied by 1316 per cent, as many as 18 stocks from the IT sector — including Tata Consultancy Services, Mphasis, Mindtree, Sasken Technologies, Firstsource Solutions and NIIT Technologies — have rallied between 20 and 45 per cent during the period.

The surge in IT, automobile and FMCG shares, analysts say, was led by investors seeking safety against the market volatility arising from global trade war fear, rising bond yields and the possibility of a faster than expected rate hike by the US Federal Reserve. Metals benefited from a rally in commodity prices globally.

Domestic mutual funds made the most of the opportunity and invested a net ~137 billion in equities during this period. Foreign portfolio investors, though, were net sellers to the tune of ~46 billion, the data shows.

“Markets were oversold as investors panicked on account of domestic and global factors. This created an opportunity to buy again at lower levels in segments that offered value,” says Vikas Khemani, chief executive officer at Edelweiss Securities.

Analysts believe the rally in these sectors will be stock-specific, since we are in the middle of the March quarter results season. That apart, assembly election outcomes, rupee movement, the monsoon and interest rate trajectories at home and globally will be key for the markets. Any volatility or negative development on account of these factors, they feel, will see investors seek safety.

“Investors have been chasing stocks where there is growth visibility and attractive valuation. Since we are in a results season, the movement ahead will be more stock-specific. IT stocks will continue to benefit from the rupee’s movement over the next few quarters. Thus far, the monsoon prediction has been favourable. If it proves right, FMCG stocks will also do well,” explains Jagannadham Thunuguntla, senior vice president and head of research (wealth) at Centrum Broking.

Among sectors, Vineet Bhatnagar, managing director and CEO at PhillipCapital (India), has upgraded the IT sector to a ‘buy’ in his model portfolio. “Chances of recovery for the IT sector in FY19 are high. The March quarter will be better for large-cap IT companies and, going forward, we see the possibility of further earning upgrades. Dollar appreciation provides further tailwinds for this sector,” he says.

G Chokkalingam, founder and managing director at Equinomics Research, advises investors to exit metal stocks, given the trade protectionism fears. “Metals is a cyclical sector and the stocks have run up sharply. One can exit Hindalco and Vedanta for now,” he says.