Proposals under Union Budget 2019 to impose a surcharge on foreign portfolio investors (FPIs) and a 20 per cent tax on share buybacks, trade-tariff salvos between the United States and China, and a collapsing domestic economy that hit a six-year low in the June quarter brought stock markets to their knees.
At the bourses, indices have cracked since the presentation of the Budget. The S&P BSE Sensex and the Nifty50 have slipped 8 per cent, each, while the S&P BSE 500 has lost 9 per cent during the period under review.
Despite this, about 70 stocks, including Hathway Cable and Datacom, HDFC Asset Management Company, Asian Paints, Torrent Pharmaceuticals, Infosys, Dr Lal Path Labs, and ICICI Prudential Life Insurance, on the S&P BSE 500 have outperformed the benchmarks by rallying up to 41 per cent.
ALSO READ: Analysts bullish on mid-cap IT stocks as valuations turn attractive
Among the outperformers, most of the pharmaceutical firms, paint companies, and information technology companies have defied the fall in the market.
Consider this: In the past three months, Godfrey Phillips, Zydus Wellness, Reliance Nippon Life Asset Management, HDFC AMC, Sun Pharma Advanced Research Company and Hathway Cable and Datacom have surged between 20 – 41 per cent.
Moreover, about 14 stocks, including HDFC Life Insurance Company, Dabur, NIIT Technologies, Infosys, Torrent Pharma, Asian Paints, and Berger Paints, have rallied up to 16 per cent.
That apart, Foreign Institutional Investors (FIIs) have increased their stake in insurance firms by up to 351 per cent, ACE Equity data shows. READ MORE HERE
Each of these sectors, analysts say, have global reasons to shine.
“Paint companies, pharmaceuticals, and IT firms are the select few sectors that are performing well in an overall weak market due to favourable global factors… A weak rupee worked for all the IT firms, and low oil prices have contributed towards gains in the paint companies,” says G.Chokkalingam, founder and managing editor, Equinomics Research. He adds that prices for pharmaceuticals firms have bottomed-out, helping them log gains.
In the past three months, the S&P BSE IT index has gained 6 per cent, followed by marginal gains of 0.4 per cent in the S&P BSE Healthcare. The S&P BSE Consumer durables index, however, plummeted 11 per cent during the same period.
Fundamentally, pharmaceutical companies reported a healthy June 2019 quarter. “The expectations were largely exceeded on EBITDA (earnings before interest, tax, depreciation and amortisation) margins and most of the companies reported revenues in-line with the expectations,” analysts at Centrum Broking wrote in a quarter-review note. Earning leaders in the Q1FY20 quarter were Abbott, Biocon, Lupin, Sun Pharma, Aurobindo and Dr Reddy Labs, while draggers were Aarti, Sanofi, FDC and Cipla, they said.
ALSO READ: Top FPIs see modest rise in investment value amid sustained volatility
Furthermore, Hindustan Unilever, Dabur, and Nestle – which rose 3, 10, and 7 per cent in the past three months – recorded volume growth of 5 per cent, 9.6 per cent, and 11.4 per cent, respectively despite the slowdown in the consumption space.
Asian Paints and Berger Paints, too, clocked double-digit growth of 16 per cent and 12 per cent, respectively.
TIME TO PICK VALUE STOCKS?
Going ahead, analysts caution investors, to pick value stocks in the consumption, construction, sanitary, hardware, and IT sectors.
“Investors should continue to buy selective mid-cap stocks like Torrent Pharma, Alembic Pharma, HDFC Life, etc that have outperformed the frontline indices” says Gaurang Shah, head of research at Geojit BNP Paribas.
He adds that the possibility of the government announcing relief measures for the real estate sector opens the avenue for investors to add paint, sanitary, pipe (hardware) companies to their portfolio.
ALSO READ: Centre may soon come out with measures to boost real estate sector
Over the past two weeks, Finance Minister Nirmala Sitharaman has announced a slew of measures to arrest the slowdown in the economy. READ MORE HERE
Chokkalingam of Equinomics Research corroborates and says that stocks have “corrected beyond the value they deserve”, and investors must pick stocks for long-term that are better in terms of governance, management, and leverage position.
|Company||Price as on Sep 3 (in Rs)||Change (%)|
|Hathway Cable & Datacom||32.20||40.9|
|Sun Pharma Advanced Research Company||157.70||32.9|
|HDFC Asset Management Company||2649.75||31.7|
|Reliance Nippon Life Asset Management||282.35||27.5|
|Godfrey Phillips India||1003.00||20.5|
|Berger Paints India||362.65||13.2|
|Can Fin Homes||404.30||12.9|
|Apollo Hospitals Enterprise||1494.00||12.7|
|Sun Pharmaceutical Industries||439.45||12.1|
|Eveready Industries (India)||77.90||11.0|
|Dr. Lal Pathlabs||1186.10||10.3|
|Gujarat State Petronet||214.15||10.3|
|HDFC Life Insurance Co||536.55||9.7|
|ICICI Prudential Life Insurance Company||423.45||7.5|
|SBI Life Insurance Company||811.80||7.2|
|ICICI Lombard General Insurance Co||1190.95||6.0|
|TV Today Network||297.00||5.6|
|Tamil Nadu Newsprint & Papers||187.00||4.8|
|JB Chemicals & Pharmaceuticals||378.15||3.6|
|Kansai Nerolac Paints||456.65||3.1|
|Fine Organic Industries||1423.55||2.4|
|Navin Fluorine International||722.25||2.3|
|Glaxosmithkline Consumer Healthcare||7968.40||2.1|
|Multi Commodity Exchange Of India||878.60||1.7|
|Zee Entertainment Enterprises||361.00||1.3|
|Prestige Estate Projects||290.20||0.9|
|Tata Global Beverages||271.20||0.6|
|Max Financial Services||417.25||0.5|
|Tata Consultancy Services||2252.25||0.4|
|Whirlpool Of India||1602.40||0.1|
|Source: ACE Equity|