These sectors are ripe for ‘value buying’ even in a bear market say experts

• Markets around the world have been under tremendous pressure due to rising interest rates, inflation indirectly caused by Russia Ukraine war and covid-19 effects.
• While the US market is already in the bear market zone, Indian markets are eerily close to the bear market territory.
• Analysts have recommended certain sectors and stocks that are worth investing even in a negative market.

The bears have taken over the US equity markets. While the Asian markets are performing better in comparison, the four-day losing streak in the Sensex and Nifty without any profit booking indicates a possibility that India might be in the red zone too.

When a stock or an index falls 20% from its recent or all-time high for a sustained period of time, it is said to be in a bear market.

According to analysts, Indian markets are another 10% correction away from it, and it all hangs on an announcement around a recession in the US markets. Markets have also been falling in India on the fear that the US Fed will increase interest rates after its inflation to 40-year high.

“The fear/expectations have increased from 50 bps to 75 bps and that’s the reason we are seeing a fresh sell-off in the US markets. The 10-year bond yield is also at the highest point in the last 10 years, which is negative for equity markets,” Shrikant Chouhan, head of equity research (Retail) at Kotak Securities told Business Insider.

But, a possible bear market or even a bear market is not a good cue for investors to pack their bags – due the possibility of value buying.

“Now that the (Indian) market has entered a bear market, there is still a 10% to 15% correction left in the market where it can touch 15000 to 14700 nifty, but value buying can be done on an accumulated basis for more than 3 years,” said Ravi Singhal, vice chairman, GCL Securities.

Buy at value in sectors that are inflation proof
India however is facing its own headwinds as the low interest rate regime is ending and inflation is eating into a lot of businesses. So for value buying, investors should pick inflation-hedged sectors like IT, mining, power, pharma, oil, gas and FMCG, says Ravi Singh, vice president and head of research at Share India.

According to Singh, most of these sectors are trading at an attractive range.

In spite of a huge meltdown, most analysts also vote for the IT sector even in a bear market. The sector saw a huge selloff on fear that their biggest markets – the US, might be under the throes of a slowdown or even a recession.

“The current phase of the IT sector is intriguing where the attention has shifted towards recession scenarios even as current demand is extremely strong,” said the Kotak Institutional Equities report.

This very meltdown makes the tech stocks extra attractive. “After discount Nifty IT looks great near 26,000 levels. TCS, Wipro, Infosys, Mindtree and Coforge look good after discount,” said Singhal.

Due to heavy selling in IT stocks, analysts expect the stocks to bottom out at higher multiples and then move up from there. Infosys, TCS and HCL Tech are some of the top picks of analysts.

“The market is becoming more and more stock-specific and it is likely that market participants will decide which is the more attractive sector after the announcement of a policy decision from the Fed. At current levels, we prefer financials and select technology stocks,” added Chouhan.

Oil sector biggest beneficiary of the Russia-Ukraine war
The only sector that has benefitted the unfortunate war between Russia and Ukraine is oil. Crude oil prices have zoomed to multi-year high at $120 per barrel. In fact, oil producing companies -- Oil India and ONGC reported a strong set of numbers in Jan-Mar because of high crude oil and gas prices.

“We like RIL, ONGC and Oil India from the oil and gas sector,” said Chouhan.

Another sector that may not be very impacted with the high inflation or a potential recession is the pharmaceutical sector. Over the past two years, the pharma index has consistently outperformed the benchmark indices and is expected to continue going ahead as well.

“The confluence of factors including focus on specialty/complex products in addition to emerging opportunities in the API space would be key growth drivers. Collectively, though near-term headwinds are likely to sustain, long term growth prospects are intact and, based on this, we have a positive view on the sector,” said a report by Sharekhan.


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