At time when market meltdown is sending shivers down the spine of the investors as the Sensex losing around 48% or nearly 9772.88 points since the beginning of the year, betting on multinational companies seem safe. For, they have witnessed a lower level of fall than their Indian counterparts.
A study carried out by FE for 100 leading multinationals and 100 leading domestic companies indicates that the market capitalisation of multinationals dropped 35.9%, whereas that of the domestic companies by 50.9%, since the beginning of 2008. ?This is because most of the multinationals operate in the FMCG or pharmaceuticals sector and these sectors are known to be defensive in nature and usually investors turn to such companies when markets fall,? says Ruchit Bhatia, an equity analyst with a broking firm.
In fact, the study reveals that three multinationals, Rayban Sun Optics India, Nestle India and Hindustan Unilever Limited (HUL) actually saw their market capitalisation going up since the beginning of the year. For Rayban Sun Optics, the management decision to delist from the exchange and the lack of ample floating stock has created the reverse trend. But in case of both Nestle and HUL, it is about investors turning to safer havens.
?Both the companies have strong expansion plans and will take advantage of the rural India promise. Moreover, these companies have a strong management track record, and that helps,? reckons Bhatia.
Among the multinationals, Siemens showed a significant decline in the market capitalisation as it decreased by 69.2% to Rs 9,961 crore on October 10, from the level of Rs 32,375 crore on January 1, 2008. Others like Alstom Projects India (-73.4%), Moser Baer India (-68.3%), Atlas Copco (-60.2%), Mphasis (-55.4%) and Kansai Nero (-50.3%), also saw huge erosion of wealth.
The top three MNCs according to market capitalisation as on October 10 are ITC (Rs 61,751 crore), HUL (Rs 48,396 crore) and Maruti Suzuki (Rs 19,642 crore). Among these, highest decline in M-cap was registered in the case of Marutu Suzuki (-31.4%).
Among the domestic companies, highest decrease in shareholder wealth was seen in the case of Unitech as its market capitalisation decreased by 83.7% from Rs 82,525 crore on January 1, 2008 to Rs 13,441 crore on October 10, 2008.
