Pharma/Healthcare, which was biggest underperformer for many years, came back into action due to COVID-19 and every country is in a hurry to find vaccine, hence experts feel the sector could remain in action going forward.
The novel coronavirus, which was first reported in Wuhan city of China, has not only dented equity market performance, but also punctured the earnings and economy.
The market recovered from its March lows, especially after many economic activities resumed in June.
The biggest gainers since March lows, among sectors, were Pharma/Healthcare and Telecom which shot up 60 percent and 45 percent, respectively. And these are expected to emerge as leaders post COVID-19 pandemic, majority of experts feel.
As there are only three players in the telecom sector, and data is the need of the hour with more and more people working from home, experts feel it will continue to be in demand and further tariff hikes are likely which can boost companies' earnings.
Pharma/Healthcare, which was biggest underperformer for many years, came back into action due to COVID-19 and every country is in a hurry to find vaccine, hence experts feel the sector could remain in action going forward.
Speciality chemicals, consumption and technology could be other themes that could emerge as leaders, going forward, experts suggest.
"In the current context, we believe that the traditional consumer-facing businesses with good cash flows and minimum leverage should do well, apart from technology, telecom, pharma, and speciality chemicals," Bhavesh Sanghvi, Chief Executive Officer at Emkay Wealth Management told Moneycontrol.
Siddhartha Khemka, Senior Vice President | Head-Retail Research at Motilal Oswal Financial Services also said post COVID-19 pandemic, some of the themes /sectors they believe could emerge as leaders are telecom, healthcare, speciality chemicals, while one can look at rural consumer space as a recovery play.
While explaining in detail, Khemka said telecom is one sector which has seen rise in usage and continued business operations during the past few months. "With the lockdowns and work from home, usage of phone and data has increased multifold. We are also witnessing higher transaction of subscribers from 2G to 4G leading to rise in average revenue per user (ARPUs)."
With consolidation phase over in telecom, Motilal Oswal can expect improving tariffs / ARPUs along with low capex going ahead to support financials over the next 2-3 years. Bharti Airtel is their preferred pick in the space followed by Jio through Reliance Industries.
Khemka believes healthcare is a defensive play. "Though the sector had been under pressure for last few years, the pandemic has opened up lot of opportunities for the sector. We have not only seen improved regulatory environment, but also higher demand," he reasoned.
Motilal Oswal likes diversified players like Dr Reddy's Labs. "Some unique plays would be API manufacturers (Divis Labs, Alkem Labs), diagnostic labs (Dr Lal Pathlabs), medical insurance (ICICI Lombard) in the overall healthcare space," he said.
"Indian specialty chemical manufacturers are benefiting from the increasing trend of de-risking of procurement from China by global chemical leaders. Additionally, depreciation of rupee and sharp correction in crude price should also benefit," said Khemka which likes companies like PI Industries and SRF in this space.
He feels the rural economy is looking attractive due to various leavers like good Rabi Crop Season, forecast of a Normal Monsoon, Government Spending and increase in MSP, Urban migrant labor going back to the villages. "All these are likely to boost demand for the rural economy. Within the rural plays one can look at segments such as tractors (M&M), two-wheelers (Hero Motocorp), and select FMCG (HUL, Britannia)."
However, sectors that one can avoid are cyclicals, infrastructure and commodities. Khemka expects these sectors to underperform till the more stability in global and domestic economy.
In fact above mentioned sectors are beaten down due to low demand following COVID-19 and these are related to economy, hence can't see major recovery at least in FY21.
Rusmik Oza, Executive Vice President, Head of fundamental Research at Kotak Securities likes capital goods, construction, utilities, metals and oil & gas, but he said most of these are economy related sectors, hence would report very poor numbers in FY21 due to COVID-19 and lockdown.
"However, the low base and recovery in the economy will lead to very high growth in FY22 earnings. Hence from a FY22 perspective most of these economy related sectors look attractive," he added.
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