Nifty is making fresh new highs every day.
Market participants are very much excited and most of the participants feel
that it will touch even 7000 in the weeks to come even though macroeconomic
indicators such as interest rates, Factory production, GDP growth, inflation are
not so good.
Even though Nifty is at record highs,
many stocks that constitute the index are still trading far below from their all-time
high. So I just wanted to check the returns given by the stocks.
For that I took the closing price of all
Nifty stocks on 28-Aug-2013 (on that day Nifty hit a 52 week low of 5118.85) and closing price for the same on
23-Apr-2014 (On that day Nifty hit a fresh high of 6861.60). I haven’t taken Tech Mahindra Ltd, United
Spirits Limited, Jaiprakash Associates Ltd and Ranbaxy Laboratories Ltd as with
effect from March 28, 2014, Jaiprakash Associates Ltd and Ranbaxy Laboratories
Ltd have been replaced by Tech Mahindra Ltd and United Spirits Limited
respectively. Kindly note the fact that the following stocks may hit a much higher
price in this period compared to the closing price of 23-Apr-2014, but since
Nifty hit a fresh high on 23-Apr-2014, I have taken that particular date as a
reference for the calculation.
After that I took the annualized
returns of all these stocks for a period of 246 days from the start date
to the end date, end date included using the formula
(End value - Beginning
value)/Beginning value) x 100 x (1/ holding period of investment in years)
(Value on 23-Apr-2014 - value on 28-Aug-2013)/
Value on 28-Aug-2013) x 100 x (1/ (246/365))
(246/365) is used in the formula for
getting the holding period in years.
All annualized returns are represented
as “% p.a.”
The below are the details for the
same.
 |
| Best Performers |
 |
| Worst Performers |
The following conclusions can be
derived from the above.
FMCG stock HUL did not give superior
returns over this period. Even though ITC has given a return of 27 percent, these
stocks under performed many other stocks of the index. The reason could be their
high valuation and also they had a fantastic return over the past couple of
years.
Software stocks also did not give much
return in this period (Except HCL Tech). Even though Infosys touched a 52 week
high of 3849.95, the stock had witnessed a sharp correction from there on. Even
though the IT spending in the US and European regions are increasing, the sharp
appreciation of rupee against the dollar, much more competition from the small
players and obviously the high valuation were the primary reasons for the
under performance.
Banking and Finance stocks gave decent
returns over this period. Private sector banks such as Axis bank and ICICI bank
outperformed public peers despite of their higher valuations. Interesting point
to be noted is that public sector banks Bank of Baroda and Punjab National Bank
gave returns of over 120 percent despite of their much higher NPA and stressed
assets. The main reason for this stellar performance can be attributed to their
low valuations, which means that value investors are accumulating undervalued
stocks. State Bank of India was the worst performer in the public sector
banking space and Kotak Mahindra from the private sector space in this period (Among
Bank Nifty stocks). Further upside in
ICICI bank and Axis bank will be capped as FII limit in these stocks has reached
the maximum limit. SBI has much more potential upside considering this. But
their nonperforming assets are an area of concern.
We can see that pharmaceutical stocks are
also struggling to make returns over this period considering their much higher valuation.
But we should not forget the fact that these stocks gave decent returns in the
past when other stocks are struggling to give even some positive returns.
The trend from FMCG, pharmaceutical and
IT is clear that investors are taking their positions from these defensive bets
to other cyclical stocks over this period.
In the 48 stocks that I considered
from Nifty, only one stock gave negative returns over this period. It is NTPC.
The reason for this is issue regarding to power price regulation and all. But
since NTPC is the largest power producer in the country and has a good past
performance as well as a good balance sheet, it should give better returns in
the long run.
Power generation companies Tata Power
and Power grid Corporation managed to get 18 percent returns over this period
which is very low compared to other stocks.
Real Estate major
DLF managed to get 22.93 percent returns during this period. But these returns
can be attributed to rising tide sentiment as a rising tide lifts almost all
the boats. The company has a lot of debts in its books and the overall real
estate market has taken a hit because of the higher interest rates scenario.
Probably that could be the reason investors are staying away from this stock.
Metal stocks
which are infamous for their cyclical behavior gave some average returns during
this period but not much. Even though Tata steel gave a return of 78.46
percent, the stock is still trading way below its all-time high. I think the
lower valuation as well as improving global sentiment should take these stocks
into much higher position.
Always remember
even if the bear market is catastrophic enough to take stocks into historical
low levels, there will be a much strong bull market to take back these stocks
into new fresh highs because market is a pendulum that swings between
unjustifiable pessimism and unbelievable optimism.
The views are
personal. J
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