A cursory look at the benchmark equity index BSE Sensex and broader indices BSE MidCap and BSE SmallCap, which are hovering at their record high levels, throws up an optimistic picture of the Indian stock market. However, data shows that 65% of stocks in these indices have plunged by double digits from their respective 52-week highs.
The list includes some popular stocks, such as Waaree Renewable Technologies, Spandana Sphoorty Financial, Fusion Micro Finance, EKI Energy Services, Zee Entertainment Enterprises, Sun Pharma Advanced Research Company, and 63 Moons Technologies, which are down over 50% from their year-high levels.
With a fall of 85%, Sanmit Infra emerged as the top loser on the list. The scrip fell to Rs 14.08 on August 29, 2024 from its 52-week high of Rs 90.92. MK Proteins emerged as the second biggest loser. Shares of the company declined 68% to Rs 10.67 on August 29, 2024 from its 52-week high of Rs 33.33, scaled on November 10, 2023.
Cressanda Railway Solutions, Lancer Container Lines, and HLV Ltd also declined 63%, 58% and 50% from their respective 52-week high levels.
The 30-share index Sensex and BSE Midcap scaled all-time highs of 82,637.03 and 49186.33, respectively, on August 30, 2024. On the other hand, the BSE Smallcap index hit an all-time high of 56,416.31 on August 28, 2024. Going ahead, PL Capital believes that the US elections are the most important factor to watch out for given rising geo political tensions globally (including SE Asia).
“We expect some tilt towards defensives like consumer, durables, building material, IT services, pharma and telecom, given rich valuations in some growth sectors. Capital goods, infra, logistics/ ports, EMS, hospitals, tourism, auto, new energy, E-com are great themes, but investors need to be cognizant of valuations,” the brokerage said in a report.
Among the other major losers, Coffee Day Enterprises, Best Agrolife, TruCap Finance, Salasar Techno Engineering, India Pesticides, Quint Digital, Medicamen Biotech, Divgi Torqtransfer Systems, Sai Silks (Kalamandir), Tatva Chintan Pharma Chem, 3I Infotech, Rajesh Exports and Camlin Fine Sciences also declined somewhere between 45%-50% from their 52-week high levels.
While giving his advice to investors, Sandip Bansal, Senior Portfolio Manager, ASK Investment Managers said, “There are pockets of excesses within in midcap and smallcap space. However, it would not be fair to paint the entire basket with one brush. Many businesses have seen a sharp improvement in earnings or long-term growth prospects. In such cases, the returns have a fundamental basis and are not necessarily due to liquidity-chasing stocks. Going ahead, it may become more stock-specific, with returns aligning themselves with those companies that deliver on high expectations.”
He thinks that capital expenditure continues to be an interesting theme as allocations and growth rates of the interim budget have been maintained. Also, government ordering activity is likely to pick up now in addition to the impending private sector capex cycle from the second half of the year.
Hardwyn India, Dish TV India, Sanghi Industries, Mishtann Foods, Sanghvi Movers, Vaibhav Global, Rishabh Instruments, Mahanagar Telephone Nigam (MTNL), Allcargo Gati, Prataap Snacks, Flair Writing Industries, Global Surfaces, Onward Technologies, Shalimar Paints and Dredging Corporation of India also declined over 40% from their respective 52-week high levels till August 29, 2024.
Some of the abovementioned stocks such as Mishtann Foods, Best Agrolife, Hardwyn, Tatva Chintan Pharma Chem, Vaibhav Global and Waaree Renewable Technologies were trading at a price-to-earnings (P/E) ratio of over 95 times on August 29, according to corporate database Ace Equity.
Brokerage Sharekhan said, “Over the medium term, the focus should be on the big picture of multi-year growth upcycle in the Indian economy and corporate earnings. Stay invested in right quality of stocks and do not miss out the opportunity to make handsome returns over the next 2 to 5 years. In the near term, the beginning of the rate cut cycle in the US and India is a key potential trigger.”