Keywords: High-Beta Stocks, Defensive Stocks, Market Rotation, Investor Sentiment

## High to High: Market Momentum Shifts from Modi Stocks to Defensives

Keywords: High-Beta Stocks, Defensive Stocks, Market Rotation, Investor Sentiment

The Indian stock market has witnessed a significant shift in market momentum in recent weeks, with high-beta “Modi stocks” giving way to more defensive sectors.

Modi Stocks Lose Luster

Companies closely associated with Prime Minister Narendra Modi’s policies, such as infrastructure, capital goods, and defense, have seen a sharp correction in their share prices. These “Modi stocks” had been outperforming the broader market for several years, buoyed by expectations of strong economic growth and government support. However, concerns over rising inflation, interest rate hikes, and a potential economic slowdown have dampened investor appetite for these cyclical stocks.

Defensive Sectors Shine

In contrast, defensive sectors such as pharmaceuticals, FMCG (fast-moving consumer goods), and IT have outperformed the market. These sectors are perceived as less vulnerable to economic headwinds due to their essential products and services, which consumers continue to demand even during periods of uncertainty.

Market Rotation

The shift in market momentum reflects a rotation from high-beta stocks, which are more volatile and have a higher correlation with the overall market, to low-beta stocks, which are less volatile and more resistant to market declines. Investors are seeking safety in defensive stocks as they navigate a period of increased economic and geopolitical risks.

Investor Sentiment

This market rotation is also driven by changing investor sentiment. With inflation rising and interest rates expected to continue climbing, investors are growing cautious about the near-term outlook for the market. They are therefore shifting their investments towards sectors that are expected to perform well in a slowing economy.

Outlook

The market momentum shift from Modi stocks to defensives is likely to continue in the near term as investors remain risk-averse. Defensive sectors are expected to continue to outperform as investors seek shelter from market volatility. However, as the economic outlook improves, high-beta stocks could regain their momentum, especially if the government announces supportive policies or the broader market sentiment turns positive.