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Straight from the Specialists

In defence of the defensives: Why IT, pharma stocks are not pariahs

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Expectation that the ongoing general election will throw up a stable government has spurred a return to risk in domestic equities. The consequent rally has meant those favoured defensives of the sluggish times – information technology and pharma stocks – received a shearing.

The CNX IT index shed 7.8 percent and CNX Pharma 10.1 percent in March – even as the benchmark Nifty surged 6.8 percent.

Assuming a strong government is indeed voted in, will it mean the two export-oriented sectors will become market pariahs? Unlikely.

The reason for this is not hard to find. Have a look at what was behind the recent weakness.

India Markets Weekahead: Markets move into pre-election rally

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

A spectacular rally in the last few days has put the market in a pre-election mode, buoyant with hopes of a stable and reform-oriented government. Led by institutional buying and the resultant short squeeze, the markets rallied more than 3 percent in the last two trading sessions – closing the week at 6526, a record high for Nifty. The markets seemed to have moved into a new territory with metals, realty, banking, capital goods, infrastructure and energy sectors participating in the rally.

 Generally, the data points for a pre-election rally are the developments on political activities and opinion polls. The economic data takes a backseat in this “rally of hope” and markets take a keen interest in electoral analysis.

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