About 72% of Nifty50 stocks are trading in the red since the announcement of the Union Budget for FY20, with stocks such as Titan, ONGC and NTPC losing anywhere between 10% and 14%
The number of stocks with a market capitalisation of Rs 1,000 crore or more slipped to 710 on Wednesday, the lowest since March 2017. This reflects the deteriorating performance of the broader market, masked by the surge in the indices. At the end of December 2017, 853 companies boasted of a market capitalisation of Rs 1,000 crore or more, data sourced from Bloomberg showed. However, with corporate earnings turning out to be very disappointing in the last two years and the recent liquidity squeeze, several stocks have lost value.
The benchmark indices remain supported by the rise of just a handful of stocks in a widely polarised market, where more than 70% of stocks have witnessed severe selling pressure. The recent fall in the markets has also been exacerbated by the proposed tax on foreign portfolio investors.
Surprisingly, about 72% of Nifty50 stocks is trading in the red since the announcement of the Union Budget for FY20, with stocks such as Titan Company, ONGC and NTPC losing anywhere between 10% and 14%.
A sharp increase in prices of gold hurt consumer demand in June and led to muted revenue growth for the quarter, Titan said in an exchange filing last week. The company cited a “tough” macro-economic environment and “very high” gold prices, particularly in June, for 13% revenue growth in Q1.
Both Nifty MidCap and SmallCap indices have given up over 4% since the Budget announcement. While 86% of Nifty MidCap constituents have lost value, 81% of Nifty Small Cap have seen a fall in prices.
Nomura, however, has re-rated Indian markets and increased its March 2020 target for Nifty 50 to 12,900 as it expects the market to get valuation support from lower bond yields. “As we approach the next few quarters, the worst in terms of growth would be behind us and things should start looking better from there on,” the brokerage said.
Interestingly, foreign portfolio investors (FPIs) who have been buyers for the most part of 2019, turned sellers in July. Overseas investors have offloaded shares worth $824.62 million so far this month and have been sellers in 11 out of the 13 sessions. On Wednesday, FPIs sold shares worth $2.5 million, provisional data on the stock exchanges showed, taking their year-to-date purchases to $10.5 billion. This compares with the domestic institutional investors’ (DIIs) selling $328.4 million worth of stocks so far this year.
The Sensex gained for third session on Wednesday, rising 84.60 points or 0.22 to close at 39,215.64 points whereas the broader Nifty rose 24.90 points or 0.21% to end the day at 11,687.50. India remains one of the most expensive markets in the world. At its close of 39,215.64 on Wednesday, the Sensex now trades at a price-earnings (P/E) multiple of 18.7 times to the estimated one-year forward earnings, against the long-term average PE of 16.9 times. This compares with 11.4 times for Kospi and 15.2 for Jakarta Composite. Russian and Turkish equities were the cheapest in the emerging market with a forward price-to-earnings ratio of 5.7 and 5.9, Bloomberg data showed.
Historically, Indian equities have traded at an average P/E premium of 26% to the Asia pacific region, excluding Japan. Eleven of 19 sector indices compiled by BSE declined on Wednesday, led by BSE Oil & Gas, BSE Telecom and BSE Energy, each falling about 1%.