Defensive stocks in the IT, pharma and FMCG sectors are suddenly in vogue once again.
The stock markets have been gyrating wildly over the last six months - going up 200-300 points one day and crashing by the same amount the next day. It has also stayed within the 18,200-20,500 band through this period. Hundred point swings happen almost every day.
The main reasons: the sliding rupee, the possible withdrawal of quantitative easing in the US, fears over an out of control current account deficit and the never-ending wait for RBI to cut interest rates.
This means there's little chance of riding the market to large gains, unless you're really lucky. But you can lose lots of money as it's easy to lose your nerve in a crash. That's why should consider defensive stocks for your portfolio. But please consult experts before investing.
"There is a valuation surge in all defensive stocks like pharma and fast moving consumer goods (FMCG)," said Rakesh Tarway, vice president, Motilal Oswal Securities.
"The intensity of market volatility increases/decreases according to news flow or due to major structural changes in the economic environment," said Ajit Mishra, assistant vice president, Religare Securities, "Currently, both situations hold true in our markets."
Thus, the Nifty has been trading roughly within the 5,500-6,200 band since January 2013 and has been witnessing wild fluctuations across the board.
"FMCG, pharma and IT are not only providing a much-needed cushion in these tough times but have also given decent returns for investors," said Mishra.
The pertinent question is: can we still rely on these stocks to hold steady?
"I believe these sectors will be less volatile than the broader markets," said Tarway, adding that "IT valuations are reasonable."