Stocks preferred by India's rich fare better in second Covid-19 wave

Shares including the likes of Bharat Heavy Electricals started outpacing the Nifty 50 Index at the end of March

In the booming $2.9 trillion equity market of virus-ravaged India, following the rich is proving to be a safer strategy.

The year-to-date return of Bloomberg Intelligence’s custom basket of 30 stocks favored by wealthy individual investors is about 8% higher than that of the National Stock Exchange of India Ltd.’s benchmark Nifty 50 Index, according to data compiled by Bloomberg.

These shares that include the likes of Bharat Heavy Electricals Ltd. started outpacing the Nifty 50 Index at the end of March, just days before a new wave of coronavirus infections made the Asian nation a global hotspot for the pandemic. Since then, the outperformance has widened even as the pace of infections slowed and the Nifty gauge neared a record high.

The stocks favored by the rich investors are “very well aligned to a few catalytic events that the market is presciently sniffing out” such as infrastructure spending, fiscal support toward consumption and global tailwinds for exporters, according Bloomberg Intelligence’s strategists Gaurav Patankar and Nitin Chanduka.

Power plant equipment maker Bharat Heavy Electricals has more than doubled this year, making it among the top gainers in Bloomberg Intelligence’s basket. Chemical maker Deepak Nitrite Ltd. has rallied about 90%.

The outperformance of these stocks means ultra-rich Indians can add on dips, stocks will have less of a downside and thus foreign investors won’t suddenly lose confidence in India, Patankar said. All of this will also create a positive read-through for deals in public as well as private markets, he added.