Where to hide if the market falls further?

High beta sectors are not typically the best sectors to hide if there is going to be an overall market correction. I would think that real estate, even financials would be weak if there is a reasonable market correction, says Sandip Sabharwal, Analyst, asksandipsabharwal.com.

How does one approach PSU banks because while there is growth which is back with HDFC Bank, ICICI Bank, the real price action has shifted to Union Bank, PNB, Can Bank? Was it just a one week wonder or a good patch that some of these PSU banks are going through?
We need to separate two things. There is a huge amount of retail and HNI interest which has shifted to PSU banks and that could create some upside for some time but for a long term investor, does it make sense to hold them when they are losing both the deposit franchises? The deposit share is reducing and the advances share is shrinking very rapidly. Longer term, I still believe there is no short term story just because they have not performed. The current quarter results might be a bit positive given that the asset quality output for the larger banks as we have been seeing and some private sector banks has been much better so that could also replicate in the PSU banks. But it is very tough to build a longer term story for stocks or companies that are continuously losing market share and will continue to keep on losing market share going forward also.

What could be a good hiding place if the market were to fall even further from here and the high beta names crack a little bit more?
It is tough to predict but high beta sectors are not typically the best sectors to hide if there is going to be an overall market correction. I would think that real estate, even financials would be weak if there is a reasonable market correction. The hiding places typically have been sectors like consumer, pharma. The consumer stocks by themselves are elevated and most of them have disappointing earnings and to that extent, that story does not play out as far as the consumer sector goes.

Protection could come maybe in insurance companies. They typically tend to move in a contrarian manner or move in a negatively correlated manner vis-à-vis the overall markets. That could be one place which could hold or as results come out, there could be some companies which could positively surprise vis-à-vis the expectation. For example, last week TVS Motors outperformed because the expectation was so low on autos that they outperformed and the stock performed. So some stocks here and there could come out which could outperform very low expectations and then they could actually hold on.

Last week Asian Paints gave a commentary saying that they have not seen such high inflation numbers in almost three decades. Having said that, even after the stock corrected after its earnings, it is still trading at very expensive valuations. Do you think things could escalate on the downside for Asian Paints?
Valuations are not comforting for Asian Paints because the stock still trades at 100-105 times current year’s elevated earnings expectations just because this quarter EPS was Rs 6 and most of the analysts are pencilling in around Rs 20 EPS for the second half which might be tough to achieve given the cost pressures. That is the fundamental part.

On the whistleblower complaint we have to see how it plays out. We cannot conclusively say either way but I read the management clarification and that does not clear things too much. I would still wait for them to carry out the investigation and come out with some conclusive commentary. A combination of factors should make Asian Paints actually an underperformer at least in the near term.