Feature

Seeking a Safe Haven

As the market tumbles, mutual fund managers recommend pharma, private banks and specialty chemicals to tide over the volatility

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By the end of August 2018, the market was scaling new heights. The Sensex and Nifty were hovering around 38,900 and 11,800 respectively as easing trade war tensions and robust growth outlook propelled them to new highs. But the rally soon turned into carnage on the back of rising crude, falling rupee and the liquidity crunch induced by the IL&FS crisis. Pretty soon, in October, the Sensex was at 33,350 and the Nifty at 10,030.

While the benchmark indices have since recovered, the storm triggered by the IL&FS default hasn’t quite died down. The September quarter earnings of Nifty companies have caused disquiet as well. Only 13 exceeded expectation and 17 were in-line with estimates. Even as analysts were expecting the earning cycle to start recovering, there have been more earning downgrades than upgrades for FY19. “The September quarter earnings season has been uneventful so far, with headline numbers broadly meeting estimates with a few disappointments,” stated a research note by Motilal Oswal Securities.

Gopal Agrawal Senior Fund manager, DSP Mutual Fund

Companies across sectors are grappling with input-cost inflation, which would weigh on operating margins. Investors are nervous due to the recent state election results and the upcoming general elections could only add to volatility. With heightened volatility being a given, investors are surely hunting for a place to hide, be it in FMCG, pharma, private banks or specialty chemicals.

Overvalued Defence 

In the dying months of 2018, markets across the world have seen massive bouts of unpredictability over US President Donald Trump’s refusal to de-escalate the trade war with China. And the recent uncertainty over his disagreement with the Fed has only added fuel to the fire. The Dow Jones Index lost 15% in December over concerns of rising interest rates and the impact of trade wars on the economy. 

But Gopal Agrawal, senior fund manager at DSP Mutual Fund, b

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