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The exuberance in the stock market that accompanied the re-election of the Narendra Modi government in May has given way to gloom after the Budget on July 5. In the two months since the Budget, the BSE Sensex has lost about 7 per cent while the BSE Mid-cap and BSE Small-cap indices have lost about 11-12 per cent.
The weakness is broad-based. Nearly 82 per cent of the 2,264 stocks quoting on the BSE have lost value. A host of factors have contributed to the squeeze. These include some Budget provisions perceived as market-unfriendly, global trade war tension, the continuing weak earnings growth of India Inc, debt troubles of many companies, corporate governance concerns, competitive pressure and the slowdown in economic growth.
The worst performers
The cut has been quite deep for many. About 566 stocks — a quarter of the listed universe — have lost 25 per cent or more over the past two months. In contrast, only 63 stocks (less than three per cent of the listed universe) have gained 25 per cent or more in this period. Fifty-six stocks have lost half or more of their value while five stocks are down 80 per cent or more.
The worst performers include known names such as Cox & Kings, Talwalkar Group stocks and Reliance Naval & Engineering, which have been hammered due to debt troubles and ratings downgrades. The stocks of Coffee Day Enterprises and Sical Logistics have also lost about 75 per cent, driven down by the debt troubles that got highlighted after the demise of promoter VG Siddhartha.
Manpasand Beverages has been hammered down about 60 per cent over the past two months due to allegations of tax fraud. The stock of Vodafone Idea is also down about 60 per cent due to a poor financial performance, a result of intense competitive pressure in the telecom industry.
Big gainers, too
But even amidst the market weakness, there are some outliers that have bucked the overall downward trend. For instance, four stocks have doubled or more in the past two months. These are largely unknown micro-cap names — trading entity Sahyog Multibase, realty player Mercantile Ventures, packaging company Yashraj Containeurs and finance company Goenka Business & Finance. Also, 20 stocks have gained 50 per cent or more. Again, most of these are largely unknown micro-cap stocks with market capitalisation in the range of ₹3—160 crore. The financial performance of many of these companies does not inspire much confidence with meagre profits and even losses posted by some.
Many of these stocks such as Sahyog Multibase and Goenka Business & Finance have been assigned higher risk groups such as ‘XT’ by the BSE, indicating higher attention from a regulatory monitoring standpoint. Investors should tread with caution with these stocks. An exception among the big-gainers is cable TV and broadband stock Den Networks, which has rallied about 60 per cent on the buzz of the rollout of Reliance Jio Fiber. Reliance Industries has a majority stake in Den Networks.
Also, just one stock in the large-cap category (HDFC AMC) and one in the mid-cap category (Reliance Nippon Life AMC) are among those that have gained 25 per cent or more. HDFC AMC’s good financial performance and its market leadership position helped the stock rally, while a change in ownership in Reliance Nippon Life AMC benefited the stock.
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