Despite a remarkable rally in equity markets this year, nearly half of the Nifty constituents have underperformed the market in 2014.
Companies from the IT and metal space trailed gains in benchmark indices and as many as six Nifty constituents including Reliance Industries (RIL), lagged the 50-share index for the fifth consecutive year.
Data compiled by FE shows that, as many as 22 Nifty companies have underperformed the equity barometer which is set to end the year with gains of over 30%. In 2011, when the benchmark lost close to a fifth of its value, about 20 constituents concluded the year in the red.
The IT space that led equity returns in 2013 – with annual returns of the order of 50-105% – featured as the prominent laggard this year while dismal performance of the metal space added to the list of underperformers. The top three IT majors have yielded 12-25% this year while Wipro is likely to post a decline in its value in 2014.
Even as four public sector undertakings, namely NMDC, NTPC, ONGC and GAIL were amongst the underperformers, the number of PSUs that lagged market returns has come off substantially compared to last year, thanks to an increased momentum in the banking stocks. Banks like SBI, PNB, BoB, were some the leading laggards last year while in 2014, these stocks have benefitted from the revival in investor interest towards the sector.
All of the five Nifty constituents from the metals space have trailed the benchmark returns with Jindal Steel & Power and Tata Steel losing 41% and 5% of their value respectively, this year. The BSE metals index has gained 8.5% year-to-date.
Despite a plunge in global prices, anaemic demand conditions amidst a sluggish recovery in India Inc’s capital expenditure have weighed on the prospects of the metals sector. Not surprisingly, three of the last five years’ consistent under-performers – Jindal Steel & Power, NMDC and Sesa Sterlite – belong to the metals sector.
Real-estate major DLF which has grappled with a slowdown in real estate demand and high debt burden in the last couple of years, once again underperformed the benchmarks as it faced a brush with regulators like CCI (Competition Commission of India) and Sebi (Securities and Exchange Board of India), While the company has managed to pay part of the R650 crore penalty imposed by CCI for resorting to unfair business practices, a Sebi order has barred the company from raising funds in the capital market.
As analysts continue to ascertain the time-line in which Reliance Industries (RIL) would see its investments in the telecom business turn profitable, the poster boy of the Indian equity market has trailed the Nifty even in 2014. Even as the Street’s concerns around the company’s GRM trends have reduced, falling crude oil prices have weighed on the stock performance of India’s largest petrochemical player this year.