Beaten-down sectors lead the rally

-

K.Venkatasubramanian
Aarati Krishnan

What is the investment that can deliver a 20 per cent return in three weeks? Believe it or not, the answer is still 'stocks'.

As many as 417 stocks have gained 20 per cent or more during the recovery in the stock markets over the past three weeks. As many as 23 of these have appreciated by over 50 per cent, with a couple (Shriram EPC and Sabero Organics) even doubling in value.

As the BSE Sensex bottomed out at 12600 levels on July 16 and climbed back over the next three weeks to 15000 levels, it has managed a 20.6 per cent return. The stocks which beat the index were not mainly penny stocks, as you would expect.

Punj Lloyd (up 45 per cent), HDFC (up 44 per cent), DLF (41 per cent), HDFC Bank (39 per cent) are some of the frontline stocks that substantially outpaced the Sensex. Stocks from unlikely sectors such as sugar, banking and realty have led the rally.

Expectations of reforms drove stocks of public sector banks, to the top of the gainers list. SBI, Union Bank of India, Indian Bank and Bank of Baroda rose between 34 and 46 per cent.

Realty majors – DLF, Unitech and Kolte Patil Developers – delivered between 30 and 63 per cent returns. Among private sector banks and financial institutions, ICICI Bank, IDBI Bank, Edelweiss Capital and Reliance Capital rose between 38 and 46 per cent.

These sectors are interest rate sensitive and declining crude oil prices have triggered hopes that interest rates could soon peak out. Beaten down valuations may also explain the buying interest in these stocks.

Sakthi Sugars, Dharani Sugars, Dwarikesh Sugar and EID Parry gained between 42 and 70 per cent, as sugar prices rose on expectations of a drop in output next year. Stocks such as RNRL, Shriram EPC, Adlabs Films, HMT and Jet Airways may not have had any specific triggers, but delivered 39 to 105 per cent returns.

Large cap stocks outpaced mid and small-caps, as buying interest first revived in the frontliners. Stocks with a high PE multiple delivered better returns in this rally than those with a low PE ratio, also reflecting the fact that investors preferred to buy better-known names.

Stocks that managed to beat the Sensex had an average PE of 20.7 times (trailing earnings), higher than the Sensex PE of 18.8 times. Those which trailed the index sported a PE of 17.8 times, at a discount to the index.

FIIs have been net buyers to the tune of Rs 2,252 crore in Indian stocks since July 16, while domestic mutual funds have bought Rs 583.9 crore worth of equity.

Popular posts from this blog

IOB capitalises on hike in stake by LIC

-
Indian Overseas Bank rose 1.53% to Rs 46.45 at 10:31 IST on BSE, after the biggest domestic instutional investors Life Insurance Corporation of India hiked its stake in the state-run bank. The bank made this announcement after trading hours on Wednesday, 25 March 2009. Meanwhile, the BSE Sensex was up 126.19 points, or 1.31%, to 9,794.09. On BSE, 31,003 shares were traded in the counter. The stock had an average daily volume of 1.93 lakh shares in the past one quarter. The stock hit a high of Rs 47 and a low of Rs 45.95 so far during the day. The stock hit a 52-week high of Rs 156.80 on 2 May 2008 and a 52-week low of Rs 37.55 on 9 March 2009. The mid-cap bank stock had underperformed the market over the past one month till 25 March 2009, falling 3.17% as compared to the Sensex's 8.60% rise. It had also underperformed the market in the past one quarter, declining 33.94% as compared to the Sensex's 1.04% rise. The bank's current equ The current price of ...
Read more

Lok Housing & Constructions builds on fund raising plans

-
Lok Housing & Constructions jumped 6.99% to Rs 107.90 at 11:20 IST on BSE ahead of a board meeting to consider fund raising options from both foreign and local market, including an institutional placement. Meanwhile, the BSE Sensex was down 50.50 points, or 0.30%, at 15203.73. On BSE, 1.86 lakh shares were traded in the counter. The scrip had an average daily volume of 4.74 lakh shares in the past one quarter. The stock hit a high of Rs 115 and a low of Rs 102 so far during the day. The stock had a 52-week high of Rs 390.50 on 1 January 2008 and a 52-week low of Rs 96.25 on 12 June 2008. The scrip had underperformed the market over the past one month till 12 June 2008, falling 26.55% compared to the Sensex's 10.18% decline. It had also underperformed the market in the past one quarter, falling 31.39% compared to Sensex's 3.24% fall. The small-cap housing projects developer has an equity capital of Rs 42.88 crore. Face value per share is Rs 10. The current...
Read more

economic times picks

-
CMP: Rs 70.50 Target Price: Rs 90 CLSA Asia-Pacific Markets maintains an 'outperform' on Jagran Prakashan, with a 12-month price target of Rs 90. "An economic slowdown notwithstanding, improving literacy and income levels in Hindi heartland imply that drivers for Jagran's growth are still in place. With a 35% ad rate hike in 2008, Jagran continues to narrow the gap with its more expensive English rivals," the foreign brokerage said in a client note, after a Q&A reply from the management. "Rising newsprint prices have made Jagran cautious on launching new editions in FY09 and its focus this year will be profitability. While management has budgeted for a minor increase in FY10 newsprint prices, it believes that prices are likely to peak in Q2FY08 and decline thereon," it added. Neyveli Lignite CMP: Rs 117.15 Target Price: Rs 160 MERRILL Lynch has maintained its 'neutral' rating on Neyveli Lignite, with a price target of Rs 160 ...
Read more