Samvat 2075 saw markets rewarding investors who chose fundamentally strong stocks, irrespective of the overall market sentiment. Stock selection assumed top priority at a time when developments – both local and global – kept markets choppy and investors on edge.
Consider this. Among the top 10 gainers in the S&P BSE500 index, five companies are from the financial sector. This comes at a time when the sentiment was impacted by the liquidity situation triggered by crisis in companies like IL&FS, Dewan Housing Finance Limited (DHFL). Yet fundamentally sound companies delivered.
“The pain in Indian equities was reflective as certain key sectors such as auto witnessed sharp volumes decline, while overall gross domestic product (GDP) in the first quarter of financial year 2019 – 20 (Q1FY20) dipped to six years low of 5 per cent,” wrote Pankaj Pandey, head of research at ICICI Securities in a recent note.
Among individual stocks, Aavas Financiers, HDFC Asset Management Company (AMC), CreditAccess Grameen, Bajaj Finance, and Manappuram Finance were the top gainers among the BSE 500 that rallied 78 per cent to 154 per cent in Samvat 2075. These outperformed the frontline indices – the S&P BSE Sensex (up 11.5 per cent) and Nifty50 (10 per cent) – till October 18. The S&P BSE500 index, on the other hand, gained 6 per cent during this period.
Only two stocks among the BSE500 pack gave over 100 per cent return in Samvat 2075. Aavas Financiers rewarded its investors by surging 154 per cent during the year, followed by HDFC AMC, which gained 103 per cent.
If market participants were rewarded for picking value stocks, there were investors that burnt their hands by picking fundamentally weak stocks. Some lost on account of negative news flow.
“In troubled times, it is the quality companies with a reputed management, strong balance sheet and healthy growth trend that perform well. Investors need to stick to basics. Invest in quality companies with a healthy growth outlook and reasonable valuations. Moreover, building a portfolio is all about understanding the macroeconomic conditions,” advised analysts at Sharekhan by BNP Paribas in a recent note.
Stocks from Anil Dhirubhai Ambani Group (ADAG), Dewan Housing Finance Corporation (DHFL), Coffee Day Enterprises, Jain Irrigation, and Eveready Industries plunged up to 95 per cent since last Diwali.
Reliance Communication (RCom), which tanked 95 per cent during the period under review, filed for bankruptcy in 2019 on the back of failed attempts to sell spectrum to Reliance Jio due to regulatory hurdles. Reliance Capital, Reliance Infra, Reliance Power, Jain Irrigation, and Eveready Industries came under severe financial stress and slipped in the range of 73-95 per cent.
DHFL, too, faced liquidity crunch triggered by the default at IL&FS in September 2018. In the wake of inability to raise further funds and therefore make interest payments, the NBFC faced several downgrades by credit rating agencies. In August 2019, the company filed for lenders-led resolution process.
Another stock that eroded investors’ wealth by 88 per cent is Coffee Day Enterprises. The café-chain made headlines in July 2019 when its owner V.G Siddhartha committed suicide due to pending debt obligations.
Shares of Lakshmi Vilas Bank slumped 79 per cent in Samvat 2075 due to its association with scam-hit Indiabulls Housing Finance. The latter is facing allegations of money laundering, which affected sentiment for the bank. Moreover in October, the Reserve Bank of India (RBI) initiated prompt-corrective action (PCA) against the bank curbing its lending activities.
|TOP GAINERS ON BSE500 DURING SAMVAT 2075|
|Company Name||CMP as on Oct 18 2019||CMP as on Nov 7 2018||Percentage Change|
|Aavas Financiers Ltd.||1679.65||661.15||154.05|
|HDFC Asset Management Company Ltd.||2882.20||1420.65||102.88|
|Adani Green Energy Ltd.||89.70||45.15||98.67|
|Adani Gas Ltd.||151.00||79.65||89.58|
|CreditAccess Grameen Ltd.||639.05||337.70||89.24|
|Maharashtra Scooters Ltd.||4629.80||2484.00||86.38|
|Bharat Petroleum Corporation Ltd.||520.25||289.20||79.89|
|Interglobe Aviation Ltd.||1729.00||962.95||79.55|
|Manappuram Finance Ltd.||154.55||86.80||78.05|
|Bajaj Finance Ltd.||4138.05||2349.10||76.15|
|TOP LOSERS ON BSE500 DURING SAMVAT 2075|
|Indiabulls Integrated Services Ltd.||71.00||329.05||-78.42|
|The Lakshmi Vilas Bank Ltd.||19.00||90.55||-79.02|
|Eveready Industries (India) Ltd.||39.75||192.20||-79.32|
|Jain Irrigation Systems Ltd.||11.25||74.15||-84.83|
|Coffee Day Enterprises Ltd.||33.75||291.40||-88.42|
|Dewan Housing Finance Corporation Ltd.||21.45||230.50||-90.69|
|Reliance Power Ltd.||2.32||30.95||-92.50|
|Reliance Infrastructure Ltd.||21.85||359.60||-93.92|
|Reliance Capital Ltd.||13.45||251.30||-94.65|
|Reliance Communications Ltd.||0.74||13.93||-94.69|