60% stocks in BS 200 underperform the Sensex in 2011.
The last two market sessions may have seen a relief rally but Indian stocks have had a bad year. As many as 121 or 60 per cent stocks in the Business Standard (BS) 200 list have underperformed the benchmark index in 2011 so far, many by a wide margin.
The Bombay Stock Exchange Sensitive Index, or Sensex, has tumbled 22.9 per cent, or 4,696 points, to 15,813 till December 2011. At this level, it would be the index's second biggest yearly fall in the past two decades. On the other hand, these 121 stocks have fallen 24-92 per cent. Of these, 61 stocks have less than halved from their December 31, 2010 levels.
The euro zone crisis, the RBI's tight monetary stance and the government's policy inaction have subjected the economy to tough times. The result: declining growth and pressure on profits leading to a fall in shareholders' wealth.
The total loss in investors' wealth was Rs 1,212,875 crore to Rs 1,576,755 crore. On the other hand, the total market capitalisation of actively traded stocks on the BSE declined 25.6 per cent to Rs 5,428,083 crore. Companies with high debt such as GTL, Lanco Infratech, IVRCL, KS Oils and Jet Airways have been hit the most - their stocks down more than 75 per cent each.
Metal, banking, capital goods, infrastructure, real estate, aviation and sugar stocks figure among the worst performers due to growth and profitability concerns.
Within these, the infrastructure and capital goods companies account for a major share. Ten of the 25 biggest losers are from these two sectors. Rising costs (interest rates and raw material) and slowdown in projects are the key factors to have impacted their performance, and hence, the stocks. The biggest losers are Lanco, followed by IVRCL, Patel Engineering and NCC, down over 74 per cent each.
"Capital goods stocks have dipped on growth concerns. As regards banking stocks, there has been a negative news flow regarding State Bank of India (SBI) and that is the reason for the stock drifting lower," said Kishor Ostwal, CMD, CNI Research.
SBI and ICICI Bank from the banking sector and Sterlite Industries, Hindalco and Tata Steel from the metal space have declined 36-51 per cent from their December 2010 levels.
"Metal stocks have been hit by a double whammy. On one hand, you have domestic issues related to mining and environmental clearances; on the global front, these companies face slowing demand. As a result, the sales will take a knock," said Gaurang Shah, AVP, Geojit BNP Paribas Financial Services.
ADAG stocks like Reliance Capital, Reliance Infra, RCom and Reliance Power are among the top 50 losers (down 53-63 per cent).
Negative news flow impacted Reliance Industries (RIL) as well as Kingfisher Airlines, which fell 29 per cent and 66 per cent, respectively. "There has been too much negative news as far as RIL is concerned. If the stock breaks Rs 710 levels (now at Rs 755) on the downside, I expect it to drift to the Rs 570-600 levels," says A K Prabhakar, senior vice-president (equity research), Anand Rathi.
A combination of global and domestic factors have seen foreign institutional investors (FII), the key drivers of Indian markets, pull out Rs 25,937 crore so far in 2011, stock exchange data show. FIIs had made a net investment of Rs 62,372 in 2010, when the index surged 17 per cent. "Globally, hot money is flowing out of commodities. The focus will now shift back to productive assets, which can happen only through equity. As a result, equity markets across the globe should witness a rise. India will form a part of the recovery process across the globe now," Ostwal said.