The S&P BSE 500 index is set to post its worst performance in seven years led by financial, automobile, infrastructure, cement and refinery stocks on the back of heavy selling by foreign portfolio investors (FPIs).
The index, which accounts 93 per cent of the total market capitalisation of BSE listed companies cover all major industries in the Indian economy, has lost 4 per cent thus far in the current calendar year 2018 (CY18), after rallying 36 per cent in calendar year (CY17). The performance in CY18 is worst since CY11 when the index had slipped 27 per cent during the year. On a year-to-date (YTD) basis, the market capitalisation (m-cap) of BSE-listed companies has plunged Rs 8.43 trillion to Rs 143.30 trillion.
FPIs sold net Rs 329 billion ($4.37 billion) thus far in CY18, their largest net outflow in the past decade. Earlier, in CY08, they had made net outflow of Rs 538 billion ($12.19 billion), Sebi data shows. The domestic mutual funds, however, pumped in net of Rs 1.18 trillion in equities during CY18, after net investment of Rs 1.19 trillion in CY17.
"Notwithstanding these opinion polls, we expect political uncertainty to hit a feverish pitch in January-April, as the risk of non-BJP parties coalescing to compete against the BJP will keep the tail risk elevated," said analysts at Nomura in a recent report.
Adding: "We expect this to adversely affect capital inflows during this period. In our base case, we expect the BJP to form the next government in May 2019, albeit without an absolute majority, as suggested by current opinion polls. Nevertheless, this should pave the way for political stability, policy continuity and trigger net capital inflows into India."
MID, SMALL-CAPS UNDERPERFORM
The S&P BSE Midcap (down 14 per cent) and the S&P BSE Smallcap index (down 24 per cent), too, recorded their sharpest yearly fall since CY11. These indices had rallied 48 per cent and 60 per cent, respectively in CY17.
Meanwhile, the benchmark indices, the S&P BSE Sensex (up 5 per cent) and Nifty 50 (up 2 per cent) are set to post positive returns in past three consecutive years. In CY17, Sensex and Nifty had rallied 28 per cent each.
Going ahead, analysts expect the mid, small-caps to outperform their larger peers in CY19. “Small-caps and mid-caps will outperform large caps in 2019, as the earnings cycle picks up and the Fed tightening cycle eases towards the middle of 2019,” said Jyotivardhan Jaipuria, founder and managing director, Valentis Advisors in an interview to Business Standard.
FINANCIALS TAKE A HIT
Nearly four out of five stocks that comprise the S&P BSE 500 index have recorded negative returns in CY18. Out of 500 companies, nearly 77 per cent, or 384 stocks, have seen their market price decline in CY18. Of these, 165 stocks slipped between 25 per cent and 50 per cent, while 57 stocks plunged over 50 per cent.
Among financials, SREI Infrastructure Finance, Reliance Capital, Dewan Housing Finance, Punjab National Bank, Syndicate Bank, Central Bank of India, Andhra Bank, GIC Housing Finance and Repco Home Finance were among the top losers. (See table below)
Bandhan Bank, the sole company out of four companies from the index that listed during the year, gained 41 per cent against its issue price. The remaining three companies – Hindustan Aeronautics, ICICI Securities and Aster DM Healthcare – were down in the range of 20 per cent to 50 per cent from their respective issue price.
|Company||Price on BSE (in Rs)|
|8K Miles Software||906.95||155.60||-82.8|
|Reliance Naval & Engg||49.25||14.20||-71.2|
|Shankara Building Prod||1778.05||548.80||-69.1|
|SREI Infrastructure Fin||99.85||34.60||-65.3|