Not A-list but high-flying shares nonetheless

While most institutional investors, including mutual funds, are primarily focusing on so-called A-group companies, the Street is seeing a lot of action outside this universe.

One in every eight companies in the crowded non-A-group space has seen their share prices more than double since end-February, when the benchmark indices dropped to a 20-month low.

The so-called A-group typically comprise the top 300 companies. Other groups are B, T and Z. Since March, the shares of 2,127 companies outside the A-group have been traded, of which 269 have seen their stock prices double. Nearly 20, including Prime Securities and Tata Metaliks, have had share prices rise four-fold or more.

The combined market capitalisation of these 269 stocks has jumped 2.5 times, by Rs 1.22 lakh crore to Rs 2 lakh crore, since end-February. The general benchmark Sensex and Nifty indices have rallied a little more than 20 per cent since then, with the Midcap and Smallcap indices gaining 42 per cent and 39 per cent, respectively.  

The average return for the 2,127 companies outside the A-group is 42 per cent, as nearly 60 companies in this universe have seen their share prices erode by more than 50 per cent.

Typically, most companies in the non-A group are not very liquid counters, with little or no institutional participation. Also, a lot of companies have been put in some of the buckets due to a history of non-compliance with the rules. Chemical (35 companies), financial (27) and textile (23) companies dominate the list of companies that have doubled. About a dozen stocks in the sugar and steel sectors, too.

The financial performance of the 269 companies which have seen their stock price double has seen a notable improvement. These companies had a combined net profit of Rs 5,212 crore in the six months ended June, against a net loss of Rs 462 crore in the same period of last year.

Thirty-five chemical companies had posted a more than double combined net profit of Rs 1,230 crore in January-June, as compared to Rs 638 crore in the same period in 2015.

Also, 16 of 300 stocks from the BSE ‘A’ group have seen their market value more than double since end-February.