Date: 01/07/2020 

H1 2020 review: 3 stocks in BSE500 index double wealth, 17 rise over 50%

In the first half of 2020, only 121 stocks from the S&P BSE 500 index delivered positive returns

Given a choice, most investors would want to skip the year 2020 from their portfolio.

Both Sensex and Nifty50 are down by about 15 percent each so far in the year 2020. Meanwhile, S&P BSE Midcap index fell 11 percent and S&P BSE Smallcap index declined nearly 8 percent.

Broader market has outperformed benchmark indices so far this year. The last six months have been a roller coaster ride for the markets. From record high in January to fall around Union Budget in Feb, and then bear market in Feb-March triggered by COVID-19 outbreak across the world.

Although both Sensex and Nifty have rallied more than 30 percent each from their March lows, thanks to global liquidity, but a bulls market is still far away, caution experts.

In the first half of 2020, only 121 stocks from the S&P BSE 500 index delivered positive returns. Among them, three stocks - Adani Green Energy, Suzlon Energy and GMM Pfaudler - rose more than 100 percent.

 

 

Out of 121 stocks, 17 rallied 50-100% in the first six months of 2020. These include Ajanta Pharma, Vaibhav Global, Dixon Technologies, Bayer CropScience, Granules India, The India Cement and Aurobindo Pharma. 

Most of the stocks are from the small & midcap space which have rallied over 50 percent in the first six months of 2020. The sheer outperformance in these stocks is largely attributed to the catch-up rally in the broader market space, and stock-specific fundamental factors.

“Cash market stocks in mid and small-cap space have always outperformed the indices after a major correction in their prices. So this time is no different. The small and midcaps that made a top in 2018 followed by 2-3 years of major price cuts are now experiencing outperformance,” he said.

Mehta further added that long-term investors should not get carried away by such outperformance and can have exposure to the extent of 20 percent in such small and midcap stocks with balance 80 percent in frontline large caps.

 

Index Performers:

Stocks which Underperformed:

More than 70 percent of the stocks in BSE500 gave negative returns in the last 6 months. And, 18 out of 376 stocks fell more than 50 percent that include names like IndusInd Bank, Future Retail, Repco Home, Lemon Tree, and Raymond.

Although the market has bounced back from the lows recorded on March 24 we are still in a bear market rally. Economists at top global institutions see contractions of 4-5 percent in India’s GDP in 2020 due to lockdown. 

The lockdown has not only impacted the economy but will lead to a big dent in earnings of India Inc. in the upcoming quarters. But, with news of reopening of economy, many stocks have seen a bounce back as well.

Source Moneycontrol.com

Date: 30/062020 

FIIs reduce stake in over 250 firms in past year; what should investors do?

Out of 254 companies, 93 have fallen more than 50 percent in the last one year

Foreign investors who were net sellers in 8 out of the last 12 months have reduced stake in over 250 companies in the 4 quarters of the past year. Although on an overall basis, FIIs were net buyers with little over Rs 5,000 crore, data from AceEquity showed.

Foreign investors' selling decisions could be based on valuations, corporate governance issues, fall in demand, or just profit-taking. Many of the stocks in which FIIs have pulled down their stake are from financials, pharma, capital goods, tourism, and infrastructure companies.

There are as many as 254 companies in which FIIs have reduced their stake, including Sun Pharma, Dabur India, Cipla, HCL Technologies and Jubilant FoodWorks.

Out of 254 companies, 93 have fallen more than 50 percent in the last one year. These include PC Jeweller, Future Retail, Sadbhav Engineering, Cox & Kings, Manpasand Beverages, Magma Fincorp, and Dewan Housing Finance.

“FIIs reduce stakes for many reasons like stretched valuations, bad corporate governance, increasing competition etc. As you pointed out FIIs have reduced stake in many bluechip companies like Jubilant FoodWorks, Nestle India, Alembic Pharma, Cipla, Dabur,” Atish Matlawala, Sr Analyst, SSJ Finance & Securities told Moneycontrol.

“We believe FIIs have sold these companies purely on the basis of valuations and would buy again when valuations become attractive. There are also few companies in the list where the standard of corporate governance is way below par so that could be the reason why FIIs exited the stocks,” he said. 

Note: Here is the list of those 93 stocks. They have fallen more than 50% in the last 1 year

 What should investors do?

There are many small & midcap companies in which FIIs have reduced their stake consistently in the last four quarters. One possible reason as pointed out by analysts is a slowdown in demand and a fall in economic activity.

Small & midcap stocks have been in a bear market since 2018 while benchmark indices entered the bear market only in 2020. However, investors should take note of the list as a reference point to shortlist stocks.

“Apart from FIIs interest, analysing company’s past financial track record, promoter background, balance sheet, cash flows, valuations, and growth prospects are extremely important,” Ajit Mishra, VP Research, Religare Broking told Moneycontrol.

Booking profits or exiting completely from the stocks should be based on doing a proper study of the recent management commentary related to the previous quarter results and future prospects of the business especially during COVID times.

Apart from that, any policy changes in the sector due to COVID could impact the sector and the companies in a negative way. Stock with any kind of corporate governance issues should be altogether avoided, suggest experts.

Which are top buys?

So can we say all stocks in which FIIs have reduced stake are sell? Analysts are of the view that there are select stocks which investors can look at for the long term.

“Keeping purview of COVID-19 and its effects, in my opinion, Polycab India Ltd., Avanti Feeds Ltd., HDFC Life Insurance Co Ltd., and Vinati Organics Ltd. might do well in coming time if investors keep these stocks for a long term,” Gaurav Garg, Head of Research CapitalVia Global Research Limited- Investment Advisor told Moneycontrol.

“Manpasand Beverages Ltd., Jet Airways (India) Ltd., Eveready Industries (India) Ltd., are the stocks which investors should avoid due to challenged corporate governance norms and their own fundamental problems,” he said.

Matlawala of SSJ Finance & Securities said that he would advise investors to stay away from companies like Reliance Capital, Cox & Kings, Manpasand beverages, Dewan Housing, Sintex Plastics, etc which are on the verge of collapse or have already collapsed.

“Companies like Dabur India, Page Industries, Tata Metaliks, 3M India, United breweries, Gillette India, VIP Industries is on our buy list,” he said.

Source (moneycontrol.com)

 Date: 27/062020 

Small & Mid-caps shine! Over 50 stocks in BSE500 rose 10-30% in a week

As many as 55 socks in the S&P BSE 500 index rallied 10-30 percent in a week that includes names like Union Bank of India, SPARC, Hindustan Zinc, ABB India, Glenmark Pharma, etc. among others.

Indian markets which started off on a strong note witnessed some profit-taking towards the close of the week but still benchmark indices managed to close with gains of over 1 percent for the week ended June 26.

The S&P BSE Sensex rose 1.2 percent while the Nifty50 gained 1.3 percent for the week ended June 26 compared with 3.5 percent rally seen in the S&P BSE Mid-cap index, and the S&P BSE Small-cap index closed with gains of 2.8 percent in the same period.

As many as 55 socks in the S&P BSE 500 index rallied 10-30 percent in a week that includes names like Union Bank of India, SPARC, Hindustan Zinc, ABB India, Glenmark Pharma, BHEL, Bandhan Bank, Adani Gas, Indian Bank, IDBI Bank, Future Consumer, and Indian Overseas Bank, etc. among others.

Experts are of the view that small and mid-caps are playing catch-up, but investors should ignore the noise, and stay with quality. Despite the fact that buying is seen in many small and mid-caps, investors should not allocate more than 20 percent of their portfolio.

"Sheer underperformance and the oversold state of small and mid-cap stocks have resulted in outperformance when the market, in general, bounced back from lower levels. Cash market stocks in mid and small-cap space have always outperformed the indices after a major correction in their prices. So this time is no different," Umesh Mehta, Head of Research, Samco Securities told Moneycontrol.

"The small and mid-caps that made a top in 2018 followed by two to three years of major price cuts are now experiencing outperformance. However, long term investors should not get carried away by such outperformance and can have exposure to the extent of 20 percent in such small and mid-cap stocks with balance 80 percent in frontline large caps," he said.