Traditional Market Safe Havens Lose Ground as IT and FMCG Sectors Struggle

IT and consumer staples stocks are no longer reliable safe havens during market volatility due to slowing growth, rising competition and shifting investor expectations. Over the past three years, the Nifty IT index has remained flat, while the Nifty FMCG index has dropped 16%. In contrast, the Nifty 50 has climbed 17% according to Bloomberg data.

Market Shifts

Harish Krishnan, chief investment officer of equity at Aditya Birla Sun Life AMC, notes that a defensive sector requires low earnings volatility, low ownership and low expectations. Past returns like the Nifty IT surge of 166% in 2009 and 60% in 2021 are unlikely to repeat. Trilok Agarwal, fund manager at Ambit Asset Management, agrees that those periods resulted from exceptional circumstances. FMCG firms face direct-to-consumer brands and quick-commerce platforms, while IT firms grapple with technology spending uncertainty and AI disruption.

Investor Reactions

Investors are now turning to healthcare, telecom, utilities, financials, real estate investment trusts, and infrastructure investment trusts for stability, according to Krishnan. Chockalingam Narayanan of ICICI Prudential AMC sees opportunities in select direct-to-consumer FMCG and mid-sized IT companies. Sachin Relekar of Axis Mutual Fund adds that true contrarian opportunities emerge only when expectations reset and earnings begin to stabilise rather than from lower share prices alone.

Context

Market sectors often cycle through periods of premium valuations and subsequent corrections as economic conditions and technologies change. Investors frequently suffer from recency bias by expecting past market leaders to maintain their defensive status permanently. However, shifting competitive landscapes and new technological disruptions constantly force investors to reevaluate where true financial safety lies.