Portfolio strategy: Experts prefer to side with defensives

Global headwinds, followed by the ongoing Russia-Ukraine crisis, has soured investor sentiments across geographies. The same was reflected in the domestic equity markets, which have been highly volatile in the last few weeks. The trend may continue in the short-term or until a resolution appears on the horizon for the geopolitical tensions, experts say.
 
Given the multitude of uncertainties on the global front, the markets have seen a sharp correction in February with the benchmark BSE Sensex and the Nifty50 indices slipping around 5 per cent each.
Given the volatility, analysts suggest investors choose stocks wisely and look at defensive plays within the information technology, FMCG and healthcare space, believing that these could be the safest bets for investors in the present scenario.
 
On a year-to-date basis, the BSE IT index has corrected 12 per cent, while the BSE FMCG index has demonstrated better performance with a relatively smaller cut of 6 per cent. The BSE healthcare index, meanwhile, has fallen 11 per cent so far this year. In comparison, the benchmark Sensex has lost 3.4 per cent.
 
Prices of key raw materials have continued to inch higher in the last few months, with both palm and crude oil at multi-year highs and materially above the levels in the December quarter.
Analysts say, the product price hikes will likely continue going forward given the higher input costs, which could further delay a potential volume growth recovery.
 
“Staple stocks have corrected 15-30 per cent from their 52-week highs. While there have been some earnings downgrades, valuations have still derated and are now close to five-year averages across most companies based on current estimates — of course, earning downside risk persists,” according to Jefferies.
 
Meanwhile, Amit Kumar Gupta, portfolio manager, Adroit Financial is bullish on hospitals within the healthcare category, as he believes these players will be largely insulated from the current headwinds and foreseeable interest rate hikes.
 
On Wednesday, the markets will open after a day’s holiday on account of Mahashivratri. Besides reacting to the global markets, geopolitical issues and the GDP numbers for the October – December 2021 period for India announced post market hours on Monday, stock-specific action is likely to continue.