The lockdown, in place since March, halted the economic activity completely across India, but benchmark indices rallied more than 30 percent during the period largely on the back of reforms initiated by the Modi government, and economic stimulus package declared by central bankers across the globe to support growth.
The lockdown turned out to be a money-making opportunity for most investors as both Sensex and Nifty made an intermediate bottom on March 24.
On the other hand, as many as 31 companies in the S&P BSE 500 index have given a negative return since then including Indiabulls Integrated Services, Shriram City, Capri Global, Repco Home Finance and Rajesh Exports.
Meanwhile, 469 companies out of BSE500 index have given positive returns since then.
Experts are of the view that some of the stocks that have witnessed a major correction and are trading below March 24 levels might look attractive. But, fall in prices should not be the only criteria while buying the stock, they say.
“Most of the stocks in the list are from sectors which are either discretionary in nature or from the financial space which is vulnerable in the current COVID-19 situation. In the current market scenario, there has been pressure on the demand side especially for high ticket items discretionary items like consumer durables and Automobiles,” Jyoti Roy, DVP Equity Strategist, Angel Broking Ltd told Moneycontrol.
“Similarly, few other industries like airlines, hospitality and multiplexes which were doing well prior to the COVID-19 outbreak had also been adversely impacted given the nature of their business,” he said.
What should investors do?
The smart rally seen in Indian markets despite the rise in COVID-19 related cases across the globe suggests that D-Street is pricing in a V-shaped kind of recovery.
Investors are advised to stay cautious and study the fundamentals of the company, as well as the business model and switch to the companies that are changing to handle the disruptions caused by COVID-19, suggest experts.
“In today’s market, the beaten-down stocks are mainly those where the impact on earnings is going to be severe or they are not sound fundamentally. Ideally, investors should avoid beaten companies without any backing fundamentals,” Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities told Moneycontrol.
“If one has done proper homework and research and know the near-term and long-term impact on earnings then they can make informed decisions. Considering that Nifty-50 is trading closer to 20x on a one-year forward PE it is ideal to avoid beaten-down companies unless one has very high conviction in the business model,” he said.
Apart from big stimulus measures announced by global central bankers which fuelled risk-on sentiment, FPI flows have also turned marginally positive in May 20, and so far in June after two successive months of outflows.
At a time when liquidity is driving most of the stocks, investors have to be cautious what they are buying because business models of most of the companies will have to undergo some changes in the COVID-19 world.
“The majority of the stock valuations point towards the future pain and uncertainty that these businesses would go through. Thus, it is advisable to judge each company individually, case-by-case, and not look for a homogeneous solution since the recovery rate of industries will vary in post COVID world,” Paras Bothra, President of Equity Research, Ashika Stock Broking told Moneycontrol.
Abhishek Karande, CMT, Senior Analyst at Reliance Securities is of the view that stocks which have witnessed major correction and are below march 24 levels might look attractive.
“However, it necessarily does not mean they could be considered for investing. If markets get exhausted these stocks can continue to edge lower and might witness extended correction,” he said.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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Published at Thu, 11 Jun 2020 04:20:04 +0000-These 30 stocks lose up to 35% since March 24; experts say avoid catching a falling knife