After flying-high for the past two years, large-cap stocks have taken a significant beating on Dalal Street since the beginning of this year, falling on an average 20 per cent.
After flying-high for the past two years, large-cap stocks have taken a significant beating on Dalal Street since the beginning of this year, falling on an average 20 per cent. Big-names like Reliance Industries Limited (RIL), are falling, now down 36.4 per cent since the start of this year. TCS has tanked 22 per cent and even Infosys is down 21 per cent. While some analysts label the fall in prices as a fire sale, some urge investors to stay cautious claiming that Foreign Institutional Investors (FII) selling might continue.
Among the top 5 companies on the BSE, in terms of market capitalisation, only Hindustan Unilever has registered a fall in share price in single digits, rest all have fallen on an average 25 per cent since the January 1. However, S Ranganathan, Head of Research at LKP Securities does not seem too convinced that large-caps have bottomed out. “In the last 2 years markets were polarised and only large-cap stocks were doing well. Mid-cap and small-cap stocks were beaten down for long. Now, when equity markets are taking a beating across the globe, FIIs book profits in markets like India where stocks have done well in the past,” he told Financial Express Online. Ranganathan says that FIIs will come last to book profits in HDFC group and Bajaj Group.
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Domestic equity benchmarks have fallen to 2016 levels so far this year. While S&P BSE Sensex plummeted to near the 28,000 mark, NSE Nifty-50 has slipped below the 9,000 mark. Amidst this carnage, FIIs have sold $4.5 billion worth of shares since the beginning of March. “FIIs have been selling heavily, so one needs to wait for a period when selling by foreign institutional investors abates. Investors should not entirely buy looking at cheap prices of big names, you don’t know if markets will fall again,” said Abhimanyu Sofat, VP Research, IIFL Securities.
However, not everyone is asking investors to stay away. Vishal Wagh, Head of research, Bonanza Portfolio who is expecting a V kind of recovery said, “Good time to buy large-cap stocks that have fallen 30-40 per cent during this turmoil. Nifty has a stop loss of 7700, the target will be 10,000 in 1-2 months.” Wagh says that addition of new cases of Coronavirus will not impact markets now, however, he adds that a spike in death toll might create fresh panic in the share market. India has so far seen 5 deaths due to Coronavirus while the number of cases has jumped the 200 mark.
Although recommendations on whether to buy large-cap stocks or not vary, the information Technology sector is among everyone’s favourite. Nikhil Kamat, co-founder, Zerodha said that IT Stocks like HCL and Infosys are a good bet for investors while adding that Pharma too could be a safe bet. “IT companies have longer contracts so this will not entirely affect their businesses,” he added.
Listing down the stocks investors should keep an eye out for, Ranganathan said, “Gas authority (GAIL) and NTPC like PSU stocks have no business being down at the price that they are.” On the other hand, Wagh said that a recovery on private banks that have fallen significantly in March is on the cards in the next few months.