Defensives Vs Value – Time to shift?
The TCS results firmly re-established the Tech space as a defensive that the markets could depend upon. With INFY, HDFC, HDFC Bank, HUL, ITC and TCS forming the formidable frontline, we see the indices getting the requisite resilience. What does this mean to sentiment? If we see positive news flows from more Index pivotals in the coming weeks, the markets will gain further stability at the top. Evidently, the bulls have read things right, If there are no nasty surprises and a few bright spots in the upcoming results, the markets will start looking ahead. The grey area is banking and the market will closely watch the numbers of the leadership pack among PSU banks. This will clinch the battle between the bulls and the bears. The bulls have held on against the brunt of bad news flows. Any good news will obviously give them the edge.
Investors know fully well that every cycle will prevail and yet do nothing to play it right.
The hunt for defensive investments has caused the prices of stocks in FMCG, pharma and IT to rise as more money seems to be chasing fewer ideas. Naturally, these Defensives are becoming pricier. At some point in time, these will no longer be worth buying by virtue of their becoming expensive. We are headed in that direction with FMCG and IT stocks already trading near their recent highs in valuations. Intelligent investing is about finding the opportune moment to switch from defensive investments into deep value investments which trade cheap. Investors could either move from Defensives to cash first and later move their money into investments or simply switch from one stock into another. As under performing companies are getting brutally punished by the stock market, the time to take a contrarian view of them isn’t too far. One needs to prepare to shed defense and then buy gradually into risk.
Defensive vs Value – let value decide your choices.