Separating the men from the boys in the market mayhem
Among the BSE 500, 68 stocks, mostly midcaps or smallcaps, have remained resilient amid a steeply falling market
The turmoil on Dalal Street continues with both key indices—the Sensex and Nifty—ending Wednesday’s session at fresh lows for this calendar year.
Benchmark indices hit a peak on 29 January, but market sentiments began to sour in the run-up to the Union budget and the plunge got deeper after the imposition of the long-term capital gains tax.
That was followed by negative developments in the banking sector such as the scam at Punjab National Bank. Other concerns including lower goods and services tax revenue collections and recent fears of a trade war too have weighed on the Indian stock market.
Consequently, most stocks are bleeding. But that is well known; what’s more interesting is: which stocks have managed to stand up in the face of adversity?
Among the BSE 500, just 68 stocks—mostly mid-caps or small-caps—have remained steady in a steeply falling market.
Venky’s (India) Ltd: India’s only listed poultry company was the top gainer, up 37% since 29 January on the back of an improved financial performance. The company is expanding its footprint in the oilseed segment with capital expenditure of Rs43.2 crore.
IT: Small and mid-cap stocks have clearly stolen the thunder of large-cap technology companies. Firstsource Solutions Ltd is up 14% since 29 January, followed by Mindtree Ltd, Larsen and Toubro Infotech Ltd, Persistent Systems Ltd, and Sonata Software Ltd. Tech Mahindra Ltd is the only large-cap in this list.
Quarterly results of large technology companies were subdued, impacted by seasonal weakness and challenges in the financial services vertical. On the other hand, some mid-tier firms reported double-digit year-on-year growth, aided by a ramp-up of large deals.
According to analysts, while the overall commentary has turned incrementally positive, one has to see when large-cap stocks will finally get their mojo back.
Pharmaceuticals: It is a similar story here. Since blue-chip pharma stocks remain entangled in company-specific and regulatory issues, investor interest seems to be shifting to their smaller counterparts. FDC Ltd and Ipca Laboratories Ltd are the top gainers here. Narayana Hrudayalaya Ltd, Eris Lifesciences Ltd, Apollo Hospitals Enterprise Ltd, Sanofi India Ltd and Fortis Healthcare Ltd have gained marginally but remain in positive territory.
Aviation: Shares of InterGlobe Aviation Ltd (IndiGo) and SpiceIet Ltd have managed to beat the index. The December quarter earnings of both companies were impressive, domestic passenger growth has been decent and yields (pricing) improved by about 6% and 10% year-on-year, respectively, say analysts. A key factor to watch out for would be the movement in crude oil prices.
Retail: Retail stocks have caught the fancy of investors especially after the listing of Avenue Supermarts Ltd (owner of D-Mart). The stock has gained around 10% since 29 January. Brokerage house Elara Securities Ltd sees the company as the next inclusion candidate in the Nifty 50 index.
However, V-Mart Retail Ltd is leading the retail pack, up 17% since 29 January. Shoppers Stop Ltd and Future Lifestyle Fashions Ltd too have been in positive territory.
Most of these companies saw their gross margins improve in the December quarter. The optimism here is driven by improving consumer sentiments, rising disposable incomes and lower penetration of organized retail. But valuations of these stocks are rich.
Finance: IDBI Bank Ltd is the only public sector lender that has sharply risen (up 26%), on hopes of privatization. Making the most of the debacle in the banking sector are housing and consumer finance companies such as Can Fin Homes Ltd, Cholamandalam Investment and Finance Co. Ltd and Bharat Financial Inclusion Ltd.