Proposals under Union Budget 2019 to impose a surcharge on foreign portfolio investors (FPIs) and a 20 per cent tax on share buybacks, trade-tariff salvos between the United States and China, and a collapsing domestic economy that hit a six-year low in the June quarter brought stock markets to their knees.
At the bourses, indices have cracked since the presentation of the Budget. The S&P BSE Sensex and the Nifty50 have slipped 8 per cent, each, while the S&P BSE 500 has lost 9 per cent during the period under review.
Despite this, about 70 stocks, including Hathway Cable and Datacom, HDFC Asset Management Company, Asian Paints, Torrent Pharmaceuticals, Infosys, Dr Lal Path Labs, and ICICI Prudential Life Insurance, on the S&P BSE 500 have outperformed the benchmarks by rallying up to 41 per cent.
ALSO READ: Analysts bullish on mid-cap IT stocks as valuations turn attractive
Among the outperformers, most of the pharmaceutical firms, paint companies, and information technology companies have defied the fall in the market.
Consider this: In the past three months, Godfrey Phillips, Zydus Wellness, Reliance Nippon Life Asset Management, HDFC AMC, Sun Pharma Advanced Research Company and Hathway Cable and Datacom have surged between 20 – 41 per cent.
Moreover, about 14 stocks, including HDFC Life Insurance Company, Dabur, NIIT Technologies, Infosys, Torrent Pharma, Asian Paints, and Berger Paints, have rallied up to 16 per cent.
That apart, Foreign Institutional Investors (FIIs) have increased their stake in insurance firms by up to 351 per cent, ACE Equity data shows. READ MORE HERE
Each of these sectors, analysts say, have global reasons to shine.
“Paint companies, pharmaceuticals, and IT firms are the select few sectors that are performing well in an overall weak market due to favourable global factors… A weak rupee worked for all the IT firms, and low oil prices have contributed towards gains in the paint companies,” says G.Chokkalingam, founder and managing editor, Equinomics Research. He adds that prices for pharmaceuticals firms have bottomed-out, helping them log gains.
In the past three months, the S&P BSE IT index has gained 6 per cent, followed by marginal gains of 0.4 per cent in the S&P BSE Healthcare. The S&P BSE Consumer durables index, however, plummeted 11 per cent during the same period.
Fundamentally, pharmaceutical companies reported a healthy June 2019 quarter. “The expectations were largely exceeded on EBITDA (earnings before interest, tax, depreciation and amortisation) margins and most of the companies reported revenues in-line with the expectations,” analysts at Centrum Broking wrote in a quarter-review note. Earning leaders in the Q1FY20 quarter were Abbott, Biocon, Lupin, Sun Pharma, Aurobindo and Dr Reddy Labs, while draggers were Aarti, Sanofi, FDC and Cipla, they said.
ALSO READ: Top FPIs see modest rise in investment value amid sustained volatility
Furthermore, Hindustan Unilever, Dabur, and Nestle – which rose 3, 10, and 7 per cent in the past three months – recorded volume growth of 5 per cent, 9.6 per cent, and 11.4 per cent, respectively despite the slowdown in the consumption space.
Asian Paints and Berger Paints, too, clocked double-digit growth of 16 per cent and 12 per cent, respectively.
TIME TO PICK VALUE STOCKS?
Going ahead, analysts caution investors, to pick value stocks in the consumption, construction, sanitary, hardware, and IT sectors.
“Investors should continue to buy selective mid-cap stocks like Torrent Pharma, Alembic Pharma, HDFC Life, etc that have outperformed the frontline indices” says Gaurang Shah, head of research at Geojit BNP Paribas.
He adds that the possibility of the government announcing relief measures for the real estate sector opens the avenue for investors to add paint, sanitary, pipe (hardware) companies to their portfolio.
ALSO READ: Centre may soon come out with measures to boost real estate sector
Over the past two weeks, Finance Minister Nirmala Sitharaman has announced a slew of measures to arrest the slowdown in the economy. READ MORE HERE
Chokkalingam of Equinomics Research corroborates and says that stocks have “corrected beyond the value they deserve”, and investors must pick stocks for long-term that are better in terms of governance, management, and leverage position.
Company Price as on Sep 3 (in Rs) Change (%)
Hathway Cable & Datacom 32.20 40.9
Sun Pharma Advanced Research Company 157.70 32.9
HDFC Asset Management Company 2649.75 31.7
Reliance Nippon Life Asset Management 282.35 27.5
Zydus Wellness 1659.85 21.3
Godfrey Phillips India 1003.00 20.5
Asian Paints 1576.50 15.9
Berger Paints India 362.65 13.2
Can Fin Homes 404.30 12.9
Apollo Hospitals Enterprise 1494.00 12.7
Sun Pharmaceutical Industries 439.45 12.1
Torrent Pharmaceuticals 1714.45 11.1
Eveready Industries (India) 77.90 11.0
Infosys 814.30 11.0
Dr. Lal Pathlabs 1186.10 10.3
Gujarat State Petronet 214.15 10.3
NIIT Technologies 1473.65 10.2
Pidilite Industries 1347.80 9.8
Dabur India 442.45 9.8
HDFC Life Insurance Co 536.55 9.7
Indraprastha Gas 328.65 8.7
Colgate-Palmolive (India) 1248.75 8.4
Ajanta Pharma 1018.20 7.9
Swan Energy 112.75 7.5
ICICI Prudential Life Insurance Company 423.45 7.5
CreditAccess Grameen 554.30 7.3
SBI Life Insurance Company 811.80 7.2
Nestle India 12684.30 6.8
Alkem Laboratories 1839.85 6.6
HCL Technologies 1108.55 6.5
Sanofi India 6089.25 6.5
ICICI Lombard General Insurance Co 1190.95 6.0
Abbott India 9428.80 5.8
Bata India 1539.10 5.7
TV Today Network 297.00 5.6
Gujarat Gas 172.25 5.6
Avenue Supermarts 1506.50 5.1
Tamil Nadu Newsprint & Papers 187.00 4.8
Phoenix Mills 683.00 4.7
Petronet LNG 264.10 4.6
Glaxosmithkline Pharmaceuticals 1239.60 4.5
Quess Corp 468.65 4.0
Hexaware Technologies 387.15 3.8
Spicejet 128.05 3.7
JB Chemicals & Pharmaceuticals 378.15 3.6
Marico 386.65 3.4
Kansai Nerolac Paints 456.65 3.1
Galaxy Surfactants 1298.05 2.8
Hindustan Unilever 1842.70 2.8
Fine Organic Industries 1423.55 2.4
Navin Fluorine International 722.25 2.3
MRF 57709.90 2.2
Adani Transmission 234.60 2.2
Glaxosmithkline Consumer Healthcare 7968.40 2.1
Natco Pharma 542.80 2.0
Multi Commodity Exchange Of India 878.60 1.7
Zee Entertainment Enterprises 361.00 1.3
Ipca Laboratories 960.85 1.2
Divis Laboratories 1639.60 1.2
Piramal Enterprises 1969.00 1.1
Prestige Estate Projects 290.20 0.9
Trent 451.95 0.8
JK Cement 1000.45 0.6
Tata Global Beverages 271.20 0.6
Max Financial Services 417.25 0.5
Tech Mahindra 704.30 0.5
Tata Consultancy Services 2252.25 0.4
Minda Industries 315.20 0.3
Mahanagar Gas 829.60 0.2
Whirlpool Of India 1602.40 0.1
Source: ACE Equity
At the bourses, indices have cracked since the presentation of the Budget. The S&P BSE Sensex and the Nifty50 have slipped 8 per cent, each, while the S&P BSE 500 has lost 9 per cent during the period under review.
Despite this, about 70 stocks, including Hathway Cable and Datacom, HDFC Asset Management Company, Asian Paints, Torrent Pharmaceuticals, Infosys, Dr Lal Path Labs, and ICICI Prudential Life Insurance, on the S&P BSE 500 have outperformed the benchmarks by rallying up to 41 per cent.
ALSO READ: Analysts bullish on mid-cap IT stocks as valuations turn attractive
Among the outperformers, most of the pharmaceutical firms, paint companies, and information technology companies have defied the fall in the market.
Consider this: In the past three months, Godfrey Phillips, Zydus Wellness, Reliance Nippon Life Asset Management, HDFC AMC, Sun Pharma Advanced Research Company and Hathway Cable and Datacom have surged between 20 – 41 per cent.
Moreover, about 14 stocks, including HDFC Life Insurance Company, Dabur, NIIT Technologies, Infosys, Torrent Pharma, Asian Paints, and Berger Paints, have rallied up to 16 per cent.
That apart, Foreign Institutional Investors (FIIs) have increased their stake in insurance firms by up to 351 per cent, ACE Equity data shows. READ MORE HERE
Each of these sectors, analysts say, have global reasons to shine.
“Paint companies, pharmaceuticals, and IT firms are the select few sectors that are performing well in an overall weak market due to favourable global factors… A weak rupee worked for all the IT firms, and low oil prices have contributed towards gains in the paint companies,” says G.Chokkalingam, founder and managing editor, Equinomics Research. He adds that prices for pharmaceuticals firms have bottomed-out, helping them log gains.
In the past three months, the S&P BSE IT index has gained 6 per cent, followed by marginal gains of 0.4 per cent in the S&P BSE Healthcare. The S&P BSE Consumer durables index, however, plummeted 11 per cent during the same period.
Fundamentally, pharmaceutical companies reported a healthy June 2019 quarter. “The expectations were largely exceeded on EBITDA (earnings before interest, tax, depreciation and amortisation) margins and most of the companies reported revenues in-line with the expectations,” analysts at Centrum Broking wrote in a quarter-review note. Earning leaders in the Q1FY20 quarter were Abbott, Biocon, Lupin, Sun Pharma, Aurobindo and Dr Reddy Labs, while draggers were Aarti, Sanofi, FDC and Cipla, they said.
ALSO READ: Top FPIs see modest rise in investment value amid sustained volatility
Furthermore, Hindustan Unilever, Dabur, and Nestle – which rose 3, 10, and 7 per cent in the past three months – recorded volume growth of 5 per cent, 9.6 per cent, and 11.4 per cent, respectively despite the slowdown in the consumption space.
Asian Paints and Berger Paints, too, clocked double-digit growth of 16 per cent and 12 per cent, respectively.
TIME TO PICK VALUE STOCKS?
Going ahead, analysts caution investors, to pick value stocks in the consumption, construction, sanitary, hardware, and IT sectors.
“Investors should continue to buy selective mid-cap stocks like Torrent Pharma, Alembic Pharma, HDFC Life, etc that have outperformed the frontline indices” says Gaurang Shah, head of research at Geojit BNP Paribas.
He adds that the possibility of the government announcing relief measures for the real estate sector opens the avenue for investors to add paint, sanitary, pipe (hardware) companies to their portfolio.
ALSO READ: Centre may soon come out with measures to boost real estate sector
Over the past two weeks, Finance Minister Nirmala Sitharaman has announced a slew of measures to arrest the slowdown in the economy. READ MORE HERE
Chokkalingam of Equinomics Research corroborates and says that stocks have “corrected beyond the value they deserve”, and investors must pick stocks for long-term that are better in terms of governance, management, and leverage position.
Company Price as on Sep 3 (in Rs) Change (%)
Hathway Cable & Datacom 32.20 40.9
Sun Pharma Advanced Research Company 157.70 32.9
HDFC Asset Management Company 2649.75 31.7
Reliance Nippon Life Asset Management 282.35 27.5
Zydus Wellness 1659.85 21.3
Godfrey Phillips India 1003.00 20.5
Asian Paints 1576.50 15.9
Berger Paints India 362.65 13.2
Can Fin Homes 404.30 12.9
Apollo Hospitals Enterprise 1494.00 12.7
Sun Pharmaceutical Industries 439.45 12.1
Torrent Pharmaceuticals 1714.45 11.1
Eveready Industries (India) 77.90 11.0
Infosys 814.30 11.0
Dr. Lal Pathlabs 1186.10 10.3
Gujarat State Petronet 214.15 10.3
NIIT Technologies 1473.65 10.2
Pidilite Industries 1347.80 9.8
Dabur India 442.45 9.8
HDFC Life Insurance Co 536.55 9.7
Indraprastha Gas 328.65 8.7
Colgate-Palmolive (India) 1248.75 8.4
Ajanta Pharma 1018.20 7.9
Swan Energy 112.75 7.5
ICICI Prudential Life Insurance Company 423.45 7.5
CreditAccess Grameen 554.30 7.3
SBI Life Insurance Company 811.80 7.2
Nestle India 12684.30 6.8
Alkem Laboratories 1839.85 6.6
HCL Technologies 1108.55 6.5
Sanofi India 6089.25 6.5
ICICI Lombard General Insurance Co 1190.95 6.0
Abbott India 9428.80 5.8
Bata India 1539.10 5.7
TV Today Network 297.00 5.6
Gujarat Gas 172.25 5.6
Avenue Supermarts 1506.50 5.1
Tamil Nadu Newsprint & Papers 187.00 4.8
Phoenix Mills 683.00 4.7
Petronet LNG 264.10 4.6
Glaxosmithkline Pharmaceuticals 1239.60 4.5
Quess Corp 468.65 4.0
Hexaware Technologies 387.15 3.8
Spicejet 128.05 3.7
JB Chemicals & Pharmaceuticals 378.15 3.6
Marico 386.65 3.4
Kansai Nerolac Paints 456.65 3.1
Galaxy Surfactants 1298.05 2.8
Hindustan Unilever 1842.70 2.8
Fine Organic Industries 1423.55 2.4
Navin Fluorine International 722.25 2.3
MRF 57709.90 2.2
Adani Transmission 234.60 2.2
Glaxosmithkline Consumer Healthcare 7968.40 2.1
Natco Pharma 542.80 2.0
Multi Commodity Exchange Of India 878.60 1.7
Zee Entertainment Enterprises 361.00 1.3
Ipca Laboratories 960.85 1.2
Divis Laboratories 1639.60 1.2
Piramal Enterprises 1969.00 1.1
Prestige Estate Projects 290.20 0.9
Trent 451.95 0.8
JK Cement 1000.45 0.6
Tata Global Beverages 271.20 0.6
Max Financial Services 417.25 0.5
Tech Mahindra 704.30 0.5
Tata Consultancy Services 2252.25 0.4
Minda Industries 315.20 0.3
Mahanagar Gas 829.60 0.2
Whirlpool Of India 1602.40 0.1
Source: ACE Equity
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