Portfolio strategy: the experts prefer to side with the defensive

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Global headwinds, followed by the ongoing Russia-Ukraine crisis, soured investors in all geographies. The same has been reflected in domestic stock markets, which have been very volatile over the past few weeks. The trend could continue in the short term or until a resolution appears on the horizon for geopolitical tensions, experts say.

Given the plethora of uncertainties on the global front, markets saw a sharp correction in February, with the benchmark BSE Sensex and Nifty50 indices slipping around 5% each.



Given the volatility, analysts suggest investors choose stocks wisely and look at defensive stocks in the areas of information technology, consumer staples and healthcare, believing that they could be the safest bets for investors in the current scenario.

Year-to-date, the BSE IT index corrected by 12%, while the BSE FMCG index performed better with a relatively smaller reduction of 6%. The BSE Healthcare Index, meanwhile, has fallen 11% so far this year. In comparison, the benchmark Sensex lost 3.4%.

Major commodity prices have continued to edge higher in recent months, with palm oil and crude oil hitting multi-year highs and significantly above December quarter levels.

Analysts said product price increases are likely to continue given rising input costs, which could further delay any resumption of volume growth.

“Basic stocks have corrected 15-30% from their 52-week highs. Although there have been some earnings downgrades, valuations have fallen further and are now close to five-year averages at most companies based on current estimates – of course, the risk of revenue loss persists,” according to Jefferies.

Meanwhile, Amit Kumar Gupta, portfolio manager, Adroit Financial is bullish on hospitals in 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 off because of Mahashivratri. In addition to reacting to global markets, geopolitical issues and GDP figures for the period October-December 2021 for India announced after hours on Monday, stock-specific action is expected to continue.

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Don F. Davis