Sectoral Funds: Triggered To Perform Post-Pandemic

The recent pandemic engulfing the world is not the only one of its kind. There have been several such critical situations in the past and each one of them has impacted the equity markets in different ways. We take here a historical look at how such events have shaped the markets and draw conclusions about the funds that investors must invest for better returns going forward.

There are some events that change the course of history. These events are so impactful that they leave an indelible mark in the history of mankind, leave alone the business. A new normal emerges after each such event, which may be quite different from the current norm. The current outbreak of the coronavirus will also be recorded as one such event that will have a huge bearing on global economy and human lives. The impact has been visible in the equity market where domestic investors lost around Rs 50 lakh crore in a short span of 48 trading sessions(Jan-20 to Mar 23), which is more than one-third of the total wealth held in the stock market. This is the highest ever wealth destruction in the history of the Indian equity market over such a short span of time. Nevertheless, we believe that there is always light at the end of tunnel. The only thing is that this time it seems that the tunnel may be a bit longer to traverse.

Impact of the Pandemic

The initial reaction to the crisis was so severe in the stock market that every sectoral index worth its name technically went into a bear phase and saw a drastic fall in value post the peak it reached on January 2020. The worst impacted indices were Bankex, Auto, Capital Goods, and Realty. They all witnessed a fall of more than 40 per cent in their value between January 20 and March 23. Even the best performing sectors, namely, healthcare and FMCG, lost one-fifth of their value in this period. In terms of categories there was no difference between the fall of large-cap, mid-cap, and small-cap – all of them sliding down by around 38 per cent.