Between Jan 01, and March 03, 2020, the actual Coronavirus period, Nifty lost 7.22%. But there were laggards that did a lot worse than the Nifty and some sectors that managed to buck the trend. Here is a look at some such key sectors and the Coronavirus impact.
Sectors that lagged the Nifty
Out of the 6 sectors that lagged the Nifty, two were not exactly an outcome of the Coronavirus syndrome. For example, PSU banks have given a return of (-25.54%) since January 01, 2020, but that has a lot more to do with NPA concerns. The telecom tangle has pushed Vodafone Idea to the edge and most banks have a huge exposure to Vodafone. Banks also corrected sharply fearing that lower GDP growth meant lower income levels and hence repayment capacity would get impacted. In fact, private banks which had seen a rapid growth in retail loans saw a sharp correction. Rich valuations of most private banks only aided the fall. That was partially virus related; but not entirely.
The other four laggards were a direct outcome of the Coronavirus syndrome. For example, the Nifty Metals Index and the Commodity Index cracked by (-17%) and (-10.52%) during this period. China remains the largest consumer of most industrial and basic commodities and a slowdown in China means a clear slowdown in demand for metals and commodities. Oil stocks corrected on the back of sharply lower oil prices as Brent Crude touched $51/bbl. That means; lower realization for extractors, lower GRMs for refiners and lower inventory valuations in general.
Auto stocks took a hit on two fronts. Many of the large auto companies rely on China as a lucrative market; JLR being one of them. Then there was the bigger worry over supply chains of raw materials getting disrupted due to the crisis in China. In short it was a double whammy for auto sector.
Sectors that held the Coronavirus at bay
Here we shall talk about 3 sectors that did fairly well at a time when markets were falling vertically. The first, of course, was the IT sector. The IT sector traditionally had minimal exposure to China with bulk of their revenues coming from the US, UK and Europe. Also, the Coronavirus crisis led to risk-off investing by global investors resulting in the rupee weakening. For a dollar defensive sector like IT, the weak rupee worked in their favour. However, with the impact now becoming global, things could change. Pharma also had a similar weak rupee logic working in its favour. Of course, pharma has supply chain issues in terms of API supplies. But with a 2-month average inventory and government ban on API exports, the supply chain issue should be addressed.
FMCG and Consumption were two themes that did fairly well. In fact, consumption and FMCG would have given positive returns had it not been for excess weightage given to ITC in the FMCG index and the presence of autos in the consumption index. These are largely domestic themes based on domestic markets and are immune to what is happening in China. Of course, the caveat is that if there are more cases of the Coronavirus detected in India, then most of these themes could come under pressure.
Mid caps get the better of large caps
Finally, one more theme that emerged in the post Coronavirus scenario is that the mid cap index has done better than the large cap Nifty. There are two reasons for the same. First, mid caps tend to perform well when oil prices are weak. That was one of the reasons that triggered the mid cap rally between 2015 and 2017. Secondly, mid caps are generally single product companies rather than vulnerable industries like oil, metals or autos.
In a nutshell, a lot of heavyweights ended up losing value in the aftermath of the Coronavirus pandemic. However, the dollar defensive, domestic consumption plays and the mid cap stories have done a lot better.