Expectations might have been high but the Nifty-50 failed to deliver this fiscal as it tanked 26%, hit by the coronavirus pandemic, which eroded 30% of Nifty’s value since the beginning of January 2020.
Nifty 50 entered the financial year 2019-20 on the back of a healthy 14.9% per cent on-year growth from the previous fiscal. Expectations might have been high but the index failed to deliver as it tanked 26% this fiscal, hit by the coronavirus pandemic, which eroded 30% of Nifty’s value since the beginning of January 2020. While most sectoral indices slumped in the grip of a slowing economy, only three outperformed the benchmark. Nifty IT index fell 18% this fiscal; and Nifty Pharma dived 24%. Nifty FMCG on the other hand dropped only 12% to be the best performing sectoral index in FY20 on the National Stock Exchange.
Nifty FMCG has seen a better performance amid a weaker market sentiment as panic buying due to coronavirus is expected to nudge the fourth quarter earnings of the companies this fiscal. ICICI Securities has pinned an expectation of 10% growth in revenues of FMCG companies due to the panic buying. Ajit Mishra, VP Research, Religare Broking, said that extreme volatility in the markets helps defensive stocks gain. “Whenever there is extreme volatility and uncertainty in the markets, defensive stocks in FMCG, IT and pharma outperform,” he added.
Mishra further said that the pharma stocks had been underperforming for long, and now some selective stocks in the pharma space are helping the sector’s overall performance. With coronavirus wreaking havoc across the globe investors have shifted towards pharma stocks hoping for a surge in revenues. Information Technology is one sector that has fallen in the crosshairs of the pandemic due to its exposure to various geographies. Analysts have cut revenue expectations and have forecast a dip in business for IT giants as travel restrictions come into play across the world, hitting new deals and finishing of the pending projects.
Among FMCG stocks Nestle India and Hindustan Unilever Limited were the biggest gainers in FY20, jumping 49% and 33% this financial year. Among IT stocks TCS fell only 9% in the fiscal, making it the best performer among peers. In the pharma sector Divi’s Laboratories was the biggest gainer, up by 14% on-year basis. Going forward Mishra says he would bet on FMCG and pharma stocks.