Stock market crash: Investors seeking safe-haven plays

Mumbai: Concerns over a new variant of Covid-19 have rattled global markets, with investors tweaking their investment strategy and seeking safe-haven plays. On Friday, investors dumped sectors that could be hit in case of another lockdown and rushed to buy safer pharmaceutical, information technology and consumer stocks.

Hotels, resorts, travel services, aviation, amusement parks and multiplexes bore the brunt of the panic.

“Hospitality stocks can be the worst hit if lockdowns are implemented in various countries and travel from affected countries like South Africa, Botswana, Germany, and Austria gets impacted,” said Amit Kumar Gupta, portfolio adviser at Adroit Financial Services.

Chalet Hotels, Indian Hotels, Lemon Tree, Speciality Restaurants, EIH and Mahindra Holidays declined between 7% and 15% on Friday, while PVR and Inox Leisure fell 11% and 9%, respectively. IndiGo parent and declined 9% and 7%, respectively.

Many of these stocks had rebounded sharply in the past few months, after taking a beating last year, on expectations that travel, tourism and entertainment would gradually recover to pre-Covid levels with the rate of infections declining and people getting vaccinated. Worries about a resurgence of the virus have dashed investor sentiment in these themes.

Analysts urged investors to stay away from these stocks for the moment and continue to invest in pharmaceutical, IT, banking, and consumer stocks in a staggered manner to ride out such volatile and uncertain times.

“As a rational response to this new development, money is moving into pharmaceuticals which might gain again from the feared health crisis and IT which is resilient on expectations of accelerating digitisation,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services. “However, this trend need not sustain. Markets always overreacted and this overreaction has now made financials like banking stocks attractive from the valuation perspective.”

Piyush Nagda, head of investment products at Prabhudas Lilladher, advised investors to be cautious and reduce tactical investment bets.

“We are seeing a shift from mid and smallcap to large caps, and the market falls provide good opportunities,” he said.

The Nifty pharmaceutical index rallied 1.7%, with Cipla, Dr Reddy’s, Alkem, Pfizer and Dr Lal Pathlabs, among others, gaining between 3% and 7%. Many of these stocks had gone out of favour in recent months with infections receding. Oxygen supplier Linde India rallied over 3%.

Analysts see corrections as an opportunity to look at building a quality investment portfolio with a medium-term outlook.

“It would be better to rejig the portfolios and reduce exposure to smallcap, penny and momentum stocks,” said Gaurav Dua, head, capital market strategy, Sharekhan. “In terms of sector allocations, we continue to be overweight on IT services, pharma, banks, and select consumer stocks.”