Markets make sharp recovery but a third of stocks still in the red

PSEs, Adani, infra stocks among laggards

Over a third of the actively-traded stocks on the NSE continue to languish below their June 3 levels even as the benchmark indices continue their upward march. On Friday, the Sensex had touched fresh record highs.

The share prices of 966 out of 2,525 actively-traded stocks on the NSE on Friday were lower than their Monday close when the benchmark indices had rallied over 3 per cent. This came after exit polls said the ruling Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) would bag two-thirds of the 543 Lok Sabha seats.

However, benchmark indices plunged as much as 9 per cent after the results showed that the BJP had failed to cross the halfway mark and had to rely on its alliance partners to form the government.

 

The continuity at the Centre helped the markets recoup all the losses suffered on Tuesday. The Sensex on Friday hit a high of 76,795, surpassing its previous high of 76,738.89 on June 3. The Nifty, too, came close to logging new highs.

However, the rising tide hasn’t lifted all the boats. Eighteen of the Nifty 50 and 193 of Nifty 500 components are yet to fully recover. The list of laggards is dominated by public sector enterprises (PSEs), infrastructure stocks and Adani group firms.

“The NDA has secured a third term and this indicates another five years of political stability. We expect the markets to keenly watch the economic policy of the government such as the Budget and the government’s 100-day plan. The volatility faced in the last few days shows why investors should stay invested in the good days and take advantage of the declines to increase exposure to equities,” said Ashish Gupta, chief investment officer (CIO), Axis Asset Management.

From the NSE 500 universe, Titagarh Rail System, REC and Adani Energy Solutions are still down over 17 per cent each since June 3. Meanwhile, from the Nifty50 components Adani Ports & Special Economic, Adani Enterprises and Bharat Petroleum Corp (BPCL) are still sharply lower.

On the other hand, the top gainers are information technology (IT), fast-moving consumer goods (FMCGs) and financial stocks.

Bikaji Foods is up 20 per cent since June 3, while Tech Mahindra, Hindustan Unilever and Wipro are up about 10 per cent each.

“Structural themes like financials and consumption should also be on a strong footing. With political uncertainty behind us, the private sector may now start implementing its plans. The capex cycle is already turning around, and government-related infrastructure spending should get a boost. We expect the focus to be back on companies and their earnings potential which is the backdrop for India’s long-term growth story,” added Gupta.

Venugopal Garre and Nikhil Arela, equity strategist at Bernstein, a brokerage, believe the selloff on June 4 was “a bit extreme.”

“We also think that while some focus on subsidies at the expense of capex is likely, we do not see a material impact in the near term. Given what we see, our previous stance on the market holds good. This is about decent economic growth but a peaking of earnings growth, less room for upward revisions and somewhat rich valuations,” they wrote in a note. Bernstein has maintained its Nifty target at 23,500.

After hitting a high of 23,320, the 50-share index closed at 23,290 on Friday.

The market capitalisation of all BSE-listed stocks on Friday stood at Rs 423.5 trillion. This is around Rs 2.42 trillion below June 3 close. However, this is up almost Rs 29 trillion since the result day's close.