Stocks rebound from March lows, but most below January peak

The year 2022 so far has been a virtual roller-coaster ride for stock market investors, with equities peaking in early January, tripping to hit lows in March and now staging a strong comeback. While things more or less seem similar with the Sensex back at 59,000-60,000 levels, beneath the surface, the dynamics of markets have undergone interesting changes.

More than 70 per cent of the BSE All Cap stocks are still below their January peak, indicating that the participation has not been broad-based. Large cap stocks have outperformed the market in both phases. Interestingly, among sectors, while there has been different winners and losers in both phases, mining and minerals held fort during the fall and has continued to rise until now.

Cumulatively, investors may have recovered over ₹31-lakh crore from stocks (BSE All Cap), thanks to the smart recovery. The rebound has ensured that quite a significant part (80 per cent) of the ₹38.5-lakh crore wealth eroded due to the decline from January 17 peak, has now been recouped. But, individual portfolios may not show the same extent of recoil. The reason being that a majority of stocks are still below respective January peaks.

Of Out of the 1,100+ stocks in BSE All Cap, nearly 800 stocks are still to reach their mid-January peak. As many as 150 stocks are down 20 per cent or more from those peaks. The stocks that are atleast one-third away from their peaks include One 97, Himatsingka Seide, Zomato and GE Power. MIRC Electronics, Welspun India and Lux Industries. On the other side, stocks such as GNFC , TV18 Broadcast and Andhra Paper, Vadilal Industries, and Dhampur Sugar have not just recovered but also shot past their January peaks. Some such as Adani Power and GMDC have even doubled.

Investors in around 50 stocks will be ruing their fate, because these unfortunate scrips fell during the down move and also during the upward climb for markets. These include Future Group stocks, One 97, Petronet LNG, and Rajesh Exports, Suryoday SFB, Thangamayil, MTAR, Coforge, PNB Housing, Nazara and Wockhardt.

Banks lead recovery

When the Sensex slipped from 61,000 levels in January 17 to hit the nadir in March 7, IT stocks saw the highest erosion in market capitalisation (mcap) losing ₹5-lakh crore (13.1 per cent of the total erosion). This was followed by banks with ₹4.4-lakh crore loss (11.4 per cent), Finance ₹4.23-lakh crore loss (10.9 per cent), RIL-led Refineries sector ₹2.43-lakh crore loss (6.3 per cent), FMCG, ₹2.04-lakh crore loss (5.3 per cent) and Automobile ₹1.75-lakh crore loss (4.5 per cent). FMCG, Automobile , Cement, Pharmaceuticals and Chemicals and were also among the top 10 wealth destroyers.

When the tide turned favourable, IT has been a bit of laggard, with only 7 per cent share in overall wealth rebound. Instead, it was banks that led the charge adding ₹3.97-lakh crore or 12.8 per cent of overall wealth rise from March 7 lows. Interestingly, new sectors have come to the fore, indicating some shift in market preference. Sectors such as Power Generation and Distribution(including Adani Power), Telecom, Gas Distribution (Adani Total Gas), Infrastructure Developers and Operators and Steel (Tata Steel) accounted for 2-7 per cent share individually in the wealth rally, compared with to 1-3 per cent share in the wealth destruction phase.

Mining and Mineral products led by Vedanta and CIL stocks, Crude Oil and Natural Gas led by ONGC and Non Ferrous Metals (Hindalco and NALCO) bucked the overall trend when markets plunged. In fact, they reported wealth addition even during such volatile phase. As markets started to rally after first week of March, Mining and Mineral products stocks, which added ₹40,000 crore m-cap when markets fell, added another ₹29,000 crore as markets sprung back.

Large caps outperform

For investors who always prefer to stick to large caps, the two opposing phases witnessed by Indian markets bring some good news. True to their label, large caps did better than mid and small caps during the fall. Individually, 10 per cent of large caps bucked the trend and rose during the market fall compared to 7 per cent of mid and small caps. Similarly, 97 per cent of large caps gave positive returns during the rebound compared with 92 per cent of mid and small caps.

Of the total paper wealth loss of ₹38.5-lakh crore during the fall, large caps accounted for ₹25.3-lakh crore (66 per cent), mid-caps ₹7.8-lakh crore (20 per cent) and small-caps ₹5.4-lakh crore (14 per cent). When the upswing happened, large caps accounted for ₹21.4-lakh crore (69 per cent), mid caps ₹5.2-lakh crore (17 per cent) and small caps ₹4.4-lakh crore (14 per cent). In the recovery phase, large caps contributed to a bigger share of m-cap growth compared to the decline, while mid caps lagged a bit.