Nifty large-caps thrifty in returns to investors

Mumbai: The equity investors’ favourite large-cap stocks by market capitalisation have not brought any cheer this time round. With the market indices continuing to slump each day, long-term investors are in deep distress as leave alone profits, even the initial investments are getting eroded after each trading session.

Even as the most popular large-cap equity index – the Nifty 50 of the NSE -- is down 7.3 per cent to 7,731 points at the close of trading on Wednesday, there are three stocks in the index whose share price have halved from where they were 365 days ago. Worse still, there are three more Nifty 50 stocks that have tripped by 30-50 per cent.

The other major large-cap equity index - the Nifty Next 50 - is actually up 7.2 per cent from a year ago, as per its closing level of 19,182 points. But one stock from this index has seen its share price halve while 10 more stocks have seen their prices plunge between 30 per cent and 50 per cent.

Much of retail and mutual fund investments being concentrated in large-cap stocks, their performance is getting watched, and the sight is not just very unpleasant. In some cases, it is very disheartening.

In all, as our analysis reveals, 17 of the 100 companies in both the large-cap indices have fallen by 30 per cent to 56 per cent (see chart). Bank of India tops the list with a 55.6 per cent drop in its share price to Rs 128.3 on the NSE, which is very close to its one-year low price of Rs 126. There was one more bank in our list - Canara Bank - whose share price is sharply down by 34.5 per cent to Rs 269.20.

According to Rahul Shah, vice president, equity advisory group at Motilal Oswal Securities, most public sector bank stocks, barring State Bank of India and Bank of Baroda, have been beaten down on the back of asset quality concerns and poor quarterly numbers in three of the last four quarters.

Following the trend, the share prices of Tata Steel, Hindalco Industries and Cairn India have halved from a year ago level, and all of them are commodity stocks. “With the overall commodity market meltdown and the sharp fall in crude prices, stocks such as Hindalco, Steel Authority of India (SAIL) and others, have been among the worst hit,” said Shah.

Tata Steel, a Nifty 50 index constituent, has seen its share price crash by 53 per cent to Rs 225.7, while Hindalco and Cairn India have plummeted 51.6 per cent and 50 per cent, respectively.

In the oil and gas sector, the worst-hit stocks seen in our list such as Cairn India, ONGC and Oil India and are primarily upstream companies, which have clearly been the worst-hit in one of the most severe declines in crude prices in recent history. GAIL (India), another oil and gas sector stock in our list, has been affected by an opposite factor – high cost of natural gas – which has severely impacted its profitability in the last few quarters.

Reliance Infrastructure, which earlier this week announced a stake sale in its Mumbai energy business, is also in the list of worst declining stocks, with a 36.9 per cent fall in its share price. There is only one pharmaceutical company that has been hit badly: Divi’s Laboratories has fallen by 34.2 per cent.

Motherson Sumi Systems, an auto ancillary stock, is another surprise in the list of worst-faring stocks, with a 34.3 per cent fall. Said Motilal Oswal Securities’ Shah, “Majority of Motherson’s sales is to Volkswagen which has been affected badly by the recent scandal. Its last quarter results were even good, and the stock’s valuation is still not cheap.”

A Motilal Oswal strategy report on the aftermath of second quarter results, noted that, in the case of BSE’s Sensex 30 stocks, there has been decline in sales for four consecutive quarters, where the latest September-end quarter saw a sales de-growth of 6 per cent.

Clearly, therefore, the last one- year period has not just seen four quarters of poor, or sluggish fundamentals, but also a brutalre-rating of the stocks, our anlaysis reveals.

 

 

Download the all new Deccan Chronicle app for Android and iOS to stay up-to-date with latest headlines and news stories in politics, entertainment, sports, technology, business and much more from India and around the world.