Mumbai: One out of every 59 stocks traded on the Bombay Stock Exchange (BSE) has bucked the trend and given positive returns to investors even as the exchange’s benchmark equity index, Sensex, has lost more than 25% since 8 January, in the wake of a subprime crisis-induced credit crunch that continues to haunt global markets. On 8 January, Sensex closed at its lifetime high of 20,873.33. The index had registered its all-time high of 21,206.77 in intra-day trading on 10 January.
Overall, 45 stocks gave positive returns to investors. There are 2,656 actively traded stocks on BSE.
Most of the outperformers are from sectors that are not interest-rate sensitive and the impact of a US economic recession on them is low, said Anand Shah, an analyst with Angel Broking Ltd, a Mumbai- based brokerage.
Some analysts have, in fact, started advising their clients to check these factors (interest rate sensitivity and vulnerability to external risks) before investing and stop blindily investing in large cap stocks (stocks with high market capitalization). “It’s high time we looked beyond Sensex and Nifty,” said Daljeet Kohli, head of research at Emkay Share and Stock Brokers Ltd.
A Mint analysis of India’s two key equity indices indicates that among the 30 stocks in Sensex, only three have been able to buck the trend while one in every 10 stocks from the 50-stock Nifty (the representative index of the National Stock Exchange) remains insulated from the widespread meltdown.
The Sensex stocks that bucked the trend are those of two drug makers—Ranbaxy Laboratories Ltd, and Cipla Ltd —and that of the country’s largest consumer products firm Hindustan Unilever Ltd (HUL). The gains, however, have not been spectacular. Ranbaxy added 5.9%, Cipla 4.9% and HUL 1.6%.
Apart from these three, which are also part of the broader Nifty index, two more Nifty stocks bucked the trend. These are of drug manufacturers Sun Pharmaceuticals Industries Ltd, which gained 8.25%, and two-wheeler maker Hero Honda Motors Ltd, up some 2%.
However, the contrarian rally does not stop with blue-chip companies. Some small-cap and penny stocks (those with little trading value) have also managed to stay afloat and offer fabulous returns.
Haryana-based packaging firm Rollatainers Ltd tops the list of such stocks, with returns of 880.3%—shares rose from Rs17.25 to Rs169.1 in the period of the study.
Five other stocks gained more than 100% in the same period. These are Gujarat Foils Ltd (152.58%), SEL Manufacturing Co. Ltd (138.62%), Shree Global Tradefin Ltd (120.72%), Kosian Industries Ltd (110.06%) and Modella Woollens Ltd (108.35%).
None of the analysts Mint spoke to tracks these stocks.
However, the analysts said the performance of the Sensex and Nifty stocks that bucked the trend doesn’t surprise them. These heavyweights in pharma and other defensive sectors, according to them, missed the rally earlier and hence had lower valuations.
“Investors are bound to shift to these stocks,” said Sumeet Budhiraja, senior vice-president, First Global Securities Pvt. Ltd, a Mumbai-based brokerage.
However, not all the companies in defensive sectors did well. “Investors generally put money into large companies, with stable fundamentals,” said Nitin A. Khandkar, vice-president of research at Mumbai-based brokerage Keynote Capital Ltd.
According to him, automobiles is slowly becoming a defensive sector as it is no longer posting aggressive salesnumbers.
Kohli of Emkay Share and Stock Brokers said Hero Honda has done better than its competitors such as Bajaj Auto Ltd and TVS Motor Co. Ltd that posted drop in sales in the December quarter.
Analysts say Hero Honda and HUL have moved up because of their strong results.
Among other outperformers, Ranbaxy has announced plans to list its drug discovery arm, after a demerger later this year, and Sun Pharma has raised its stake in Israeli drug maker Taro Pharma from 25% to 34.4%.
Analysts say the valuations of many other companies which were performing well during the bull run are stretched.
They list both Reliance Energy Ltd and realtor DLF Ltd in this category. While Reliance Energy lost 49.2% in the period of the study, DLF’s loss has been 45.51%.
The stock price of Jaiprakash Associates Ltd, which was included in the Sensex in mid-March, has dropped 51.22% since 8 January.
ICICI Bank Ltd and Reliance Communications Ltd are some other big losers.
Two-thirds of the firms that have bucked the trend belong to B group and other smaller categories such as S, T and Z groups that are not very liquid.
The S group represents small stocks that were earlier traded on BSE-Indonext, the erstwhile small-cap stock trading platform. The T group, too, consists of penny stocks, settled on a trade-to-trade basis, while Z group comprises companies which have failed to comply with the listing requirements of the exchange.
Several of these penny stocks, unlike the blue chips, are generally manipulated by operators during a bear phase, said one analyst.
“These penny stocks have extremely low liquidity (low trading activity) and can be easily manipulated (by operators),” said Shah of Angel Broking.
The daily turnover of A group (large cap) shares on8 January was Rs3,994 crore. In contrast, the turnover of S and T group stocks were Rs343 crore and Rs150 crore, respectively, and the total traded value of Z group stocks wasRs8.3 crore.