The mood may be bearish on Dalal Street after a year of huge losses and no broad-based recovery is expected soon, but analysts seem to be relatively bullish for a few sectors, like IT, private banks and FMCG, in 2012.
The IT sector in fact fared much better in 2011 too, as the BSE IT index outperformed the barometer Sensex. The fall of 15.72 per cent in the BSE IT index was less than the Sensex’ decline of 24.64 per cent - its second worst ever.
Rupee movements remain a significant trigger for the IT companies and a fall in its value has helped their stocks, the analysts said, while noting that the software companies might spring up a positive surprise during their quarterly earnings later this month.
In terms of sectoral performance, the BSE FMCG index was the most resilient, as investors chose to repose their faith in defensive stocks amid overall volatility. The FMCG index gained 9.53 per cent in 2011, while the BSE Reality index was worst performing sector with a 51.83 per cent fall.
The sectors like real estate and infrastructure might continue to underperform, at least in the first half of 2012, whereas banks (mainly private sector), IT and FMCG are likely to outperform this year.
“We remain bearish on the overall market in view of depreciating rupee and foreign funds who have turned net sellers... My top picks are IT, FMCG and private banks for the year 2012,” Mr Alex Matthews of Geojit BNP Paribas said.
Most of the FMCG companies have been able to maintain their margins inspite of increasing costs. The sector would benefit from the fall in food inflation as input cost would also come down, Mr Matthews said.
Auto and banking stocks were hit hard during 2011, mainly on account of a rising interest rate regime, but any reversal of rate hikes might work in their favour in coming months.
“All rate sensitive segments such as auto and banks will be closely watched this year, but, investors also need to take into account that the trend might reverse after the first reversal of rate hikes by the RBI,” CNI Research CMD Mr Kishore Ostwal said.
There are growing expectations for the RBI to start easing interest rates, especially after the central bank in its mid-quarter review signalled about a very low probability of any further upward rate action.
Market experts are of the opinion that high interest rates, rising inflation, slower GDP growth rate and depreciating rupee still continues to be major concerns.
On the rupee front, experts said that outlook will continue to remain cloudy as factors responsible for its depreciation were unlikely to subside in a hurry.