New Covid variant unlikely to impact FMCG, pharma, telecom stocks

On Friday, equity markets in India and several countries declined sharply followed by the reports of the new variant in South Africa.

The barometer 30-scrip Sensex closed at 57,107 points, down by 1,687 points, or 2.87 per cent, and the broader 50-scrip Nifty closed the day at 17,026 points, down by 509 points, or 2.91 per cent on Friday.

"We are seeing the first meaningful correction in the current bull and it is likely to be a double-digit correction. Corrections are to be considered healthy for the market and in the previous big bull run of 2003-2007, there were three instances of more than 30 per cent correction," said Parth Nyati, Founder of Tradingo.

Besides, such a healthy correction will provide buying opportunities in select sectors that are looking attractive amid the recent fall, Nyati said.

He advised the investors to not hurry and buy aggressive on the dips but instead go for the favorable risk-reward opportunities. 

"FMCG sector is one of them because the Nifty FMCG index has corrected more than 10 per cent where most of the counters are trading near critical support levels. The FMCG sector is defensive and the recent fall in commodity prices on the back of rising concerns of Covid will ease their input cost pressure and that was a key concern for them, therefore, the FMCG sector may outperform in the near term," he said.

"Pharma stocks are getting in good health after a long period of underperformance where many stocks had corrected between 25-50 per cent from the peak. They may also do well in the near term on the back of rising worries of a new variant of Covid-19."

While most sectors performed poorly on Friday, pharma stocks such as Alkem Laboratories, Cadila Healthcare, Dr. Reddy's, Divi's Laboratories, Cipla among others rose considerably during the session.

Besides, the telecom sector may continue to do well as it is the least impacted sector by Covid.

Additionally, realty, capital goods, power and infrastructure, banking, textile, and technology may continue to do well for the next couple of years and therefore investors should focus on quality stocks in these areas amid the recent correction, he added.