Sustained sell-off in the broader market: Over a fourth of stocks hit 52-week lows

If the slide continues, retail investors could too withdraw money.

Stock Market decline
As many as 142 stocks from the NSE500 universe tested their 52-week lows since June 13

The sustained sell-off in the broader market has hammered many blue-chip stocks. More than a fourth of Nifty500 companies slipping to their 52-week lows last week as growing fears of recession triggered a sell-off across the globe. With central banks around the world moving toward aggressive policy tightening, investors chose to stay away from risky assets as sucking out liquidity from the system would stifle economic growth.

As many as 142 stocks from the NSE500 universe tested their 52-week lows since June 13 as the Index plunged to its lowest levels since May 25, 2021. The index, which represents about 90% of the nation’s market capitalisation with almost 98% of the total turnover, has corrected 18.2% since October highs. The erosion in market value for these 142 stocks since October 18 stands at Rs 26.3 trillion, with TCS and HDFC Bank losing Rs 2.2 trillion and Rs 2.1 trillion, respectively.

Market participants are of the view that if the slide in equities persist, the retail investors, too, could think about withdrawing monies from the markets wherever they are in profit or in smaller losses. Moreover, flows from the household may slowdown as banks raise deposit rates. According to analysts, asset allocation decisions of households towards equities have a high dependence on bank deposit rates.

The list features marquee names from the information technology and metal space. Shares of top four IT firms – Tata Consultancy Services, Infosys, HCL Technologies and Wipro – plummeted to their 52-week lows on June 17. Among the metals pack, Tata Steel, Hindustan Zinc, Hindalco Industries and SAIL also slumped to their lowest levels in last one year.

After last year’s stellar rally, the metal counters are melting sharply with the Nifty Metal Index correcting over 30% over the last two months. The Nifty Metal Index had gained as much as 70% in 2021 against Nifty50’s gain of 24.1% during the same period. While the fear of recession rattled the IT sector, stringent lockdowns in China due to its zero-Covid policy in Q2 of CY22 impacted metal counters.

Kotak Institutional Equities argues that the current phase of the IT sector is intriguing where the attention has shifted towards recession scenarios even as current demand is extremely strong. The brokerage, which reduced its earnings targets for the sector, said, “We moderate our stance and bake in normalised global IT spending growth of 3-4% for CY2023E and 7% for CY2022E. We cut our FY2023-FY2025E revenue estimates by 2-10% for our coverage universe.”

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