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Nestle, HUL, Asian Paints, Airtel stocks show resilience amid market mayhem

All these stocks' fortunes are linked to domestic consumption, rather than global growth.

Jash Kriplani  |  Mumbai 

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Experts say the consumer discretionary company has remained resilient due to its strong balance-sheet and orientation towards domestic demand.

The meltdown in has led to a sharp wealth erosion across stocks, with 1,242 trading at 52-week lows. Since all-time high of 12,362 points on January 14, Nifty has corrected over 20 per cent. However, in this same period, four of Nifty 50 stocks are offering some green cover to investors.

These include Nestlé India, Hindustan Unilever (HUL), Asian Paints, and Bharti Airtel. All these stocks' fortunes are linked to domestic consumption, rather than global growth.

“It is not surprising that investors are looking for pockets of safety in the current environment and are putting their funds in consumer staple names like Nestlé India and HUL,” said Jigar Shah, chief executive officer of Maybank Kim Eng Securities.

“In such an environment, investors seek for cash proxies and demand for consumer staples is always going to stay, regardless of such external headwinds. So, valuations are of little consequence at present,” Shah said.

While HUL is trading at 51 one-year forward earnings, Nestlé India is at 70.6 one-year forward earnings. Since January 14, Nestlé India has given returns of 4.7 per cent, while HUL is up 2.35 per cent.

Asian Paints is another stock that has held up in face of a sell-off across the Street. In the same period, the stock has given slightly positive returns of 1.3 per cent.

Experts say the consumer discretionary company has remained resilient due to its strong balance sheet and orientation towards domestic demand.

“Stocks with any linkage to the global economy have taken a bigger knock. There is uncertainty over which part of their global value chain can get disrupted due to the scare,” said Pankaj Pandey, head of research at ICICI Securities.

“Companies with good balance-sheet and domestic focus have shown resilience,” he said.

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Also, a drop in crude oil prices, which is one of the key input costs for the company, is expected to give positive triggers to the earnings.

Since beginning of January, prices of Brent crude are down 54 per cent.

Among other stocks, Bharti Airtel has remained flat during this period of massive selling. “The telecom company is emerging out of eight-ten year of underperformance. Further, the fundamentals for the telecom sector are improving.

Tariffs are going up, there is consolidation, and there is unlikely to be any impact on domestic use of cell-phones or internet due to such globally-linked factors,” Shah said.

Dr Reddy’s Laboratories has given negative returns. But, the stock’s fall has been among the least in the Nifty universe, with the stock down 3.3 per cent since January 14.

According to analysts, pharma companies are not expected to get majorly affected by the scare as pharma products will be in more demand as this outbreak spreads.

On Wednesday, the World Health Organization declared as a pandemic.

These stocks have managed to hold up even as several blue-chip stocks have cracked. Reliance Industries, Tata Consultancy Services, and HDFC twins (Housing Development and Finance Corporate and HDFC Bank) are trading at their 52-week lows. These stocks have fallen between 15-26 per cent since January 14.

First Published: Thu, March 12 2020. 19:33 IST
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