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Recession Proof Stocks in India 2022: Every time the markets reach an all-time high, along with the existing optimism the fear also increases. Is this the peak that the market can reach this year? Are we currently in a bubble? Is the Indian economy headed towards a recession? These are some of the questions that loom around in every investor’s mind. Although it is not with certainty that one can predict what happens in the market or the economy investors can still focus on what they can control.

In this article, we take a look at exactly this aspect of ‘How one can create a portfolio that can withstand a recession?’. Keep reading to find out more about Recession Proof Stocks in India 2022.

Recession Proof Stocks in India 2022 Image 1

What is a Recession?

Before we jump into understanding what sectors and types of stocks that we should invest in let us first understand ‘what is a recession?’. When a country receives 2 quarters of negative growth the country has entered into a recession. But along with this come a whole new set of problems.

As the growth falls it not only stops creating new jobs for its citizens, the negative growth also leads to existing jobs being lost. This, in turn, leads to a whole new set of problems. As panic spreads citizens become more cautious when it comes to their spending habits. Not only are fewer investments made, but citizens also withdraw their current investments and savings to weather the storm.

In addition to this investors who follow the herd also panic and sell off their investments as the prices of shares fall during a mass sell-off. In addition to this, a recession also brings with it other challenges like inflation which only makes the problems harder to cope with.

Recession Proof Stocks in India 2022

After reading some of the horrors in the previous paragraph one may assume that it is best to simply stay away from the markets. But this thought does way more damage than good considering that the stock markets are falling. A reduction in spending in the economy does not put an end to all spending.

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People still have to go on with life and that too comes at a cost! Identifying where this expenditure goes, which cannot be stopped. This requires looking closer at where people cannot stop spending, a little smart thinking and adapting to changes bought forth by the recession.

Before we jump into the list it is also important to know that no industry is recession-proof! One may suffer a small fall in their investment but is still expected to survive the recession on better terms! Hence it is always advisable to include stocks from the following industries and their Recession Proof Stocks in India 2022 for your portfolio when a recession hits or even better, before!

1. FMCG Sector

Recession Proof Stocks in India 2022 - FMCG Sector

Irrespective of the period an economy is going through, people cannot live without certain items. Even though people might stop spending on expensive restaurants they still will keep buying the food essentials required. People still have to take care of themselves and buy toothpaste, soap, shampoo detergent, dish soap etc.

Another interesting aspect one would come across during covid was that hosiery stocks flourished! This was because with the lockdowns in place every person was stuck in their homes. Miserable as the lockdowns were everyone tried their best to remain cozy and comfortable in their innerwear at home. This in turn led to boosting the prospects of these companies.

As these products are always in demand irrespective of the economic environment they are called consumer staples. This industry is generally the first choice when it comes to investing during a recession.
Following are some of the top FMCG companies in the Indian markets.

CompanyMCap (In Cr)CMPPEDebt Equity
Hind. Unilever₹5,89,853 ₹2,51066.20.02
Nestle India₹1,77,077₹18,36676.40.13
Dabur India₹96,772₹54653.60.12
Godrej Consumer₹88,893₹86949.60.15
ITC Ltd.₹3,60,638₹29223.70

2. Discount Retailers Sector

DMart Owner RK Damani Success Story cover

This is where playing it smart comes in. The consumer staples have to be purchased somewhere. This itself makes the place selling these products an investment opportunity in times of recession. If we take a look at the covid-19 crash one can find out that billionaire RK Damani was among the few around the globe to not only protect his wealth but also increase it in the midst of covid.

This was because of his company DMart which is engaged in one of the top retail chains in the world. The company operating model is quite special. DMart only includes products that have a low shelf life. This means that consumer staples make up a large portion of their product portfolio.

But investors must take caution while investing here. This is because not every retail chain operates as a discount retailer. Most of them expand their product portfolio to include as many products as possible or to include luxury items as well. Both of which are harmful in times of recession.

3. Pharma Sector

Recession Proof Stocks in India 2022 Pharma Sector

Similar to consumer staples another sector that does not receive a shortfall in demand during a recession is the pharma industry. Irrespective of the economy individuals with chronic diseases have to keep accessing healthcare.

Even on other fronts, a failing economy will only result in further worsening of people’s health depending on the cause of the calamity. This unfortunately increases the demand for products released by Pharma companies.

Following are some of the top Pharma companies in India.

Company's NameMCap (In Cr)CMPPEDebt Equity
Sun Pharma.Inds.₹2,02,984₹84630.60.03
Divi's Lab.₹97,707₹3,681
Dr Reddy's Labs₹72,435₹4,35233.20.18

4. Power and Gas Sector

Indian Electricity & Power Sector theme

After noticing other industries on this list it would not come as a surprise to see this industry. Power and Gas products belong to another group of essentials whose demands are not as affected as much in comparison to other industries. These utilities like electricity, fuel are very important as something that cannot be compromised in today’s day and age. Following are some of the top companies in the power and gas sector.

5. Other Sectors

Recession Proof Stocks in India 2022 liqour sector

There are many other sectors that also have significant advantages over others in times of a recession. This is where investors adaptive abilities come to the test. In recent times technology also has come to play a very important role in times of recession.

One of the best examples posts the covid crash was Zoom. This technology allowed many companies to function during the lockdowns. The shares of the company increased in multi-folds thanks to this. There are many companies today that operate completely online. These turned out to be multi-baggers during covid as their work was not affected.
In addition, Alchohol companies is another sector investor can find shelter in. It has been observed that during recession companies that sell high-end alcohol generally suffer. This is because although consumers reduce intake they shift to other cheaper brands in times of recession. This however was not the case in India during covid as the sector suffered due to the strict lockdowns.

In Closing

What we have seen above are sectors one can find shelter in and still benefit from. However, this does not mean that the other sectors in the market are not investment-worthy. In fact, investors will most probably easily identify gems during a recession. If one looks at recessions as an opportunity they are just testing times which weed out the weak companies in various sectors.

If one still wants to invest in other sectors he can go through the top companies in the sector. A closer look into the financials like the debt will show how well the company will be able to weather the recession. An industry leader with low debt will perform better than those with high debt.

Also, this provides them with a cushion to finance operations through debt in tough times. Once a recession is over these companies will find room to flourish as their competition will come out financially worse off.

A recession also gives other opportunities as many good companies are available with low P/E ratios. One can also look outside the stock market for opportunities. These include bonds and gods gifts to earth GOLD. That’s all for this post. Let us know your investing strategy in the comments below and what you think about this article. Happy Investing!

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