Investors Turn to Defensives as Nifty Remains Under Pressure

June 14, 2022 Trading 4 min read
Investors Turn to Defensives as Nifty Remains Under Pressure

The year 2022 has proven to be turbulent for the global risky assets. The Indian equity market is also under severe selling pressure in line with world indices. The Nifty has fallen more than 9% this year and has declined over 15% from its all-time high hit in October last year.

Multiple global and domestic factors are behind this market decline. The geopolitical crisis in Eastern Europe due to the Russia-Ukraine war, rising interest rates, soaring inflation, high crude oil prices, depreciating rupee, rising COVID-19 cases in China and declining economic growth have hurt investor sentiment.

Foreign Institutional Investors (FIIs) continued to liquidate their position for nine consecutive months. So far in June 2022, they have sold Indian equities worth Rs 23,000. 

As investors pressed the panic button, the markets witnessed extreme volatility. Investors are struggling to protect their portfolios. One way to tide over this turbulence is to ensure enough allocation towards defensive bets.

Defensive businesses are those which see demand in all seasons. Their business does not depend upon market cycles and they also offer high dividend payouts. Investors find such defensive sectors attractive at times of heightened volatility or uncertainty in the market and regardless of the overall trend in the market.

Such defensive sectors include Consumption, Utilities and Healthcare.

Consumer Sector

Consumer staple companies or FMCG companies fall under the defensive sector category. These companies produce daily needs items such as food, beverages, hygiene products, tobacco, etc. which see high demand irrespective of the market condition. Even during weak economic growth, stocks of consumer companies tend to outperform.

While the benchmark Nifty50 has fallen over 9% year-to-date (YTD), Nifty FMCG has declined only 1.5% in 2022. In the last one year, the Nifty FMCG index has gained over 3.7% against half a percent loss witnessed by Nifty50 during the same period. Take a look at some of the top performers from the sector:

ITC

The diversified conglomerate ITC has rallied more than 27% in the last one year. The company, which has a presence across industries such as cigarettes, FMCG, hotels, packaging, paperboards, agribusiness, etc. has been a consistent performer this year despite the macro and global headwinds.

ITC posted strong earnings for the quarter ended March 2022 driven by robust growth in the cigarettes business. ITC shares hit a 52-week high of Rs 282.35 on May 20, 2022.

United Spirits 

United Spirits shares jumped over 20% in the last one year led by positive sentiment on the premiumisation trend in the liquor industry.

The alcohol maker posted a consolidated net profit of Rs 178.60 crore in the fourth quarter of fiscal 2022 upon the revenue of Rs 2,559.50 crore. The stock hit a 52-week low of Rs 629.10 on July 28, 2021, and a 52-week high of Rs 1,019.95 on November 09, 2021.

Radico Kahitan 

Another alcohol industry company Radico Khaitan has been a top performer among Nifty FMCG in the last one year amid volatile times. The stock has gained over 11% in one year.

The liquor maker had reported a consolidated net profit of Rs 50.15 crore in Q4FY22, while its revenue from operations was at Rs 3,224.45 crore. On January 5, 2022, Radico Khaitan stock price hit a 52-week high of Rs 1,294.00, and it touched a 52-week low of Rs 701.95 on June 14, 2021.

Utility sector

Utilities such as electricity, gas and water are the basic needs and are required in all business cycles. The demand in this sector remains unaffected by all the economic phases and changes in the market.

The Nifty Energy index rallied over 21% in last one year. The top contributor to this rally were Tata Power, Adani Green Energy, Adani Transmission, ONGC and NTPC which jumped anywhere between 25% to 75%.

Tata Power Company

Tata Power Company share price rallied around 80% in the last one year. The stock has been on the investors’ radar amid its strong performance across all segments, which include conventional energy generation, transmission and distribution, renewable energy generation and electric vehicle infrastructure. 

The Tata Group company reported a stellar performance for the fiscal year 2021-2022 as the integrated power producer posted a net profit of Rs 2,156 crore, up 50% YoY. The company’s revenue increased 28% YoY to Rs 42,576 crore.

Tata Power stock touched a 52-week high of Rs 298.05 on April 7, 2022, and a 52-week low of Rs 116.60 on June 14, 2021.

Adani Green Energy 

The shares of Adani Green Energy rallied more than 47% during the last one year. The company has been in the news recently after its subsidiary Adani Hybrid Energy Jaisalmer One Ltd commissioned a 390 MW wind-solar hybrid power plant at Jaisalmer. Adani Green Energy has an operational capacity of 5.8 GW. The stock hit a 52-high of Rs 3,050.00 on April 19, 2022.

Adani Transmission

Another Adani Group company, Adani Transmission, has been a consistent performer in the sector. The stock has given positive returns of over 18% YTD and more than 35% in last one year. The stock has jumped more than 780% in last three years.

 

Healthcare Sector

Healthcare stocks, which include pharmaceutical companies and manufacturers of medical equipment, are also considered defensive stocks. This is because healthcare and medicine are required regardless of economic situation. Here are some top-performing healthcare stocks in the last one year:

Sun Pharmaceutical Industries

Pharma major Sun Pharmaceutical Industries rallied more than 21% in the last one year and over 110% in past three years. On April 29, 2022, Sun Pharma stock hit a 52-week high of Rs 967.05 apiece on the NSE. It had touched a 52-week low of Rs 652.70 on June 18, 2021.

Abbot India 

Shares of drug firm Abbott India gained over 8% in one year, while they rose more than 106% in past three years. The stock price hit a 52-week low of Rs 15,514.00 on February 08, 2022, and on October 05, 2021, it hit a 52-week high of Rs 23,934.4 on the NSE.

The company posted a net profit of Rs 211 crore for the fourth quarter ended March 2022 and revenue from operations at Rs 1,255 crore. 

Apollo Hospitals Enterprises

Apollo Hospitals Enterprises is a leading multispecialty hospital chain operator. The company’s stock has remained in the negative territory so far in 2022. The stock gained over 10% in one year and more than 170% in the last three years.

Disclaimer: This article is for information purposes only and should not be considered as stock recommendation or advice to buy or sell shares of any company. Investing in the stock market can be risky. It is therefore advisable to research well or consult an investment advisor before investing in shares, derivatives or any other such financial instruments traded on the exchanges.

 


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