This week for 3-straight sessions on the back of strong global cues, Indian benchmark indices gained almost 15% but still are down 25% for the month due to the coronavirus outbreak which is seeing a spike both in confirmed cases as well as deaths on account of it globally. And as past examples of crisis situation suggests while there is room for further correction in the markets, there tends to be sharp rebounds post such dramatic falls.
So, here we suggest one stock that given its line of business can provide you with reasonable returns during the coronavirus pandemic:
As the coronavirus outbreak has prompted to maintain high degree of personal hygiene, products such as handwash, sanitisers, floor cleaner, detergents are fast going off the shelves. So, the country's leading FMCG company Hindustan Unilever Ltd. (HUL) catering to the segment has good prospects amid the pandemic.
On the Nifty too with gains of over 14% so far during the calendar year 2020, the stock has been the top performer.
Notably, of the 43 analysts tracking the counter, 30 have given a 'buy' rating on the stock while 12 maintain a 'hold' call. Also, earlier this week on March 24, HUL announced signing of an agreement with Glenmark to buy its womens' intimate hygiene brand 'VWash' for an undisclosed sum. The completion of the deal is subject to fulfillment of some of the conditions and both HUL and Glenmark will close transaction in few months time.
It's a sign that the company is still functioning "as normal as these present circumstances would allow", said analysts at JM Financial Institutional Securities Ltd. in a note.
"Though the personal wash category is fully penetrated, it is expected to witness an unprecedented increase in per capita consumption with increasing awareness of personal hygiene," Sanjay Manyal and Kapil Jagasia, noted an analysts with ICICI Securities Ltd.
Axis Securities Recommends HUL Stock in its Top Short-Term Picks
The brokerage house advises on realigning one's portfolio based on market conditions, meaning some stocks could still be sold and quality stocks can be bought. For the short term, the brokerage recommends HUL and gives the below rationale:
1. The business of the company will not see much of an impact due to coronavirus as the demand for its product line has witnessed tremendous surge.
2. The stock has seen a considerable correction and when the Nifty was trailing around 7500 mark in March 2020, the stock made a low of Rs. 1839.30 on March 19, 2020 versus its 52-week high price of Rs. 2307.20, which amounts to a fall of huge 20%.
3. Also, the stock is suggested to protect shareholder's capital and at the same time would provide reasonable returns.