Investors who don’t understand the basics of the market usually chase beaten-down, low-priced stocks on Dalal Street to make a quick buck. Some investors manage to generate handsome profits, while others get completely trapped. The latest shareholding data shows that retail investors own somewhere between 15% AND 39% stake in select well-known small-cap stocks such as Brightcom Group, GTL Infrastructure, GVK Power & Infrastructure, Jaiprakash Associates, Jaiprakash Power Ventures, RattanIndia Power, Reliance Power, Suzlon Energy, and Unitech. These stocks have eroded 78 to 98% of investors’ wealth from their respective all-time highs.
Asked what an investor should do with these stocks, market expert Ravi Singh suggests investors stay away from stocks with weak fundamentals. However, while sharing his views on Brightcom Group, Singh added that this stock will never be a multi-bagger. Of late, the market regulator Sebi refused to lift the securities market restriction imposed on Suresh Kumar Reddy, promoter of Brightcom Group, in a case concerning irregularities in preferential allotments of shares made by the company. Meanwhile, the company is yet to file its September quarter earnings.
In a regulatory filing on February 13, Brightcom Group said, “The resignation of previous auditors and the comprehensive reappointment process for new auditors have unavoidably delayed our September quarter financial results. Our new auditors are undertaking diligent review procedures as they get up to speed on our company’s financial position. Additionally, the churn in our finance department impacted our ability to provide timely information to auditors for various reasons. We aim to disclose the auditor-reviewed September quarter results within three weeks and appreciate our shareholders’ understanding during this challenging period.”
Shares of Brightcom Group have tumbled 86% to Rs 17.73 on March 4, 2024, against its all-time high of Rs 122.88, scaled on December 24, 2021. “We see the stock at Rs 13. One should sell Brightcom Group shares on the rise,” Singh said.
Commenting on Jaiprakash Power Ventures, the market watcher added that the company needs funds to grow. “If there will be any support from the government, then we may see some movement in the stock. At present, we do not expect anything from this stock for the next 2 years. Recent outperformance in Jaiprakash Power Ventures can be attributed to buying in power stocks. Risk-takers can invest a very small amount in the stock for an upside target of Rs 22-25,” he said. Shares of the company traded 95% down at Rs 18.48 on March 4, 2024, against their all-time high of Rs 340, touched on January 4, 2008. The company had consolidated total debt of Rs 4754.49 crore as of March 31, 2023.
For the nine months ended December 2023, the company posted a consolidated profit of Rs 433.16 crore, up 335.73%, against Rs 99.41 crore in the same period last year. On the other hand, consolidated sales of the company increased 19% YoY to Rs 5,247.95 crore during the same period.
Singh further advised even long-term investors to stay away from Reliance Power, which has plunged 96% from its all-time high. “We see Reliance Power at Rs 15,” he said. He also believes that Jaiprakash Associates may deliver negligible returns to investors going ahead, and investors can avoid the stock.
The next stock on the list is RattanIndia Power, which had consolidated debt of nearly Rs 11,000 crore as of March 31, 2023. In fact, promoters’ pledging stood at 88.65% as of December 2023. “We may see the stock in the range of Rs 5 to Rs 11. One should avoid RattanIndia Power,” he said. Shares of RattanIndia Power have plunged 78% so far from all-time high levels. The market analyst also advised investors to stay away from stocks like GTL Infra and GVK Power. He also sees around a 10% correction in real estate player Unitech.
Commenting on renewable energy player Suzlon, Singh said this has already turned into a multibagger from its recent lows. “The turnaround story has played out in Suzlon and it may trade in the range of Rs 42-52 for the next 4-6 months,” he said.
What to buy in this market? Singh said if someone is looking for a stock below Rs 100, then they can consider South Indian Bank with an upside target of Rs 42. “One can also buy Bharat Road Network Limited for an upside target of Rs 95. This stock may be a multibagger stock over a period of time. We also like NHPC with a target price of Rs 100 and other banking stocks (except Dhanlaxmi Bank) which are trading below Rs 100."