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Monday, November 28, 2022

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What Investors Should Bet On Amid Global Downturn — Analysts’ Take

As monetary tightening by central banks worldwide continues to spook markets, analysts advise caution, at least in the short term.

“Empirical analysis of sharp corrections in the past, including those which were caused due to recession in advanced economies, suggest that defensives outperform during such periods,” Antique Stock Broking Ltd. said in its investor note, highlighting that global equities have corrected sharply over the week.

Even as India continues to outperform globally given it is relatively better placed, the market could still remain volatile with a possible sharp correction in the near term, according to the brokerage.

The risk of a potential recession looms over global economies, evident by the sharper-than-anticipated rate hike cycle, energy crisis in Europe and weakness in China.

The brokerage expects terminal interest rates in India to be about 6.5%, higher than its current estimate of 6%, in order to avoid a sharp rupee depreciation. This is due to a sharp rate hike cycle in the U.S. and relatively lower foreign exchange import cover of about nine months.

Citing empirical analysis of past 17 corrections, Antique said defensive stocks such as FMCG, IT services and pharmaceuticals outperformed. Cyclicals such as metals, capital goods, banks and infrastructure stocks underperformed.

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