Breach of this key technical level signals deeper correction. Banks' finance stocks comprise nearly half the list
In the five months after the benchmark Sensex touched its closing peak and thereafter started losing momentum, nearly a third of BSE 500 companies have slipped to their 52-week low. The 30-share index scaled a mark of 29,682 in late January and is now down 6% from this peak, thanks to a stellar recovery observed since mid-June.
Weak investor sentiment due to consistently poor earnings growth and lack of any visible pick up in real economic activity has weighed on investor sentiment leading to profit booking in some of the key sectors.
Banking and finance firms account for nearly a fifth of the universe of stocks that touched their 52-week low in the last five months. Interestingly, banks and finance stocks comprise nearly half of the Sensex constituents that touched this level (52-week low). A breach of the 52-week low demonstrates a downward trend in a stock.
The list also includes stocks like Tata Motors, Tata Steel and Hindalco which are currently trading at declines of over 20% apiece since late January. Other heavyweights like ITC, Vedanta and ONGC are among stocks that touched this crucial level in June having lost 10-15% during this period.
In June, when net inflows from foreign portfolio investors (FPI) stood at 23-month low, 107 companies touched this level. FPIs have offloaded shares worth $961 mn in June.
Although country’s largest private refiner Reliance Industries also hit its 52-week low in March, the stock bounced back and rallied around 25% since then.
The core sectors which have been gasping with high debt and contracting profit margins also figure significantly in the list with ten companies from the power generation and eight each from infrastructure and steel sectors being part of this list.