A new rally is taking shape in the capital markets.Even as uncertainty prevails over the short-term direction of the Indian stock market, 13 stocks among India’s top-50 listed companies have turned from underperformers during January 2008, when the markets touched an all time high, to market leaders now, when the markets are still relatively depressed.
A SundayET analysis of 50 stocks in the NSE Nifty Index, reveals that 13 stocks are currently trading above the prices they were quoting at as on January 10, 2008 on the stock exchange.
The composition includes three auto manufacturing companies (Hero Honda Motors, Maruti Suzuki & Mahindra & Mahindra), three IT entities (Infosys Technologies, TCS & Wipro), two pharma players (Sun Pharmaceutical Industries & Cipla), two FMCG giants (Hindustan Unilever & ITC), two oil & gas firms (Bharat Petroleum Corporation & Cairn India) and one bank (Punjab National Bank).
Stocks such as Hero Honda (121% up) and Maruti Suzuki (50% up), in fact, are quoting way above the levels they were trading at a year and a half earlier. “These stocks belong to the sectors — auto, IT, oil marketing, FMCG and pharma — which underperformed in the last market rally and were hugely under-owned from an investor point of view,” Anup Bagchi, executive director of ICICI Securities said.
The market had turned sour in 2008, which witnessed all the popular sectors namely, metals, infrastructure, and realty undergoing huge corrections as the momentum shifted to the defensive sectors such as FMCG and pharma.
“Markets have been positively surprised by the profits reported by auto companies such as Hero Honda, Maruti, M&M and Bajaj Auto (adjusted for demerger) and this has led to a price-to-earnings (P/E) expansion in these scrips,” Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services said.
Mr Oswal believes superior returns delivered by these stocks is primarily due to change in company specific fundamentals and partly because of P/E expansion. Put simply, the P/E is the ratio of the price per share to earnings per share.
Saibal Ghosh, chief investment officer at Aegon Religare Life Insurance, however, has a different view on the subject. He thinks it’s a case of too much money chasing too few quality stocks. “India is getting re-rated amongst foreign investors. The high earnings visibility is driving up the demand for them,” he said.
Stock market, analysts feel, could trade in a broad range going forward as large cap stocks have moved ahead of their fair value zone. The fair value of an index is arrived at by calculating the sum total of all the underlying values. It indicates how much price an investor is willing to pay for a stock at utmost.
Mr Oswal remains bullish on the Indian equity market despite the prevailing scepticism. “History repeats itself, but it’s very unlikely in the short to medium term — so what we saw in 2008 by way of demolition in stock prices is unlikely to be seen in 2009, 2010 or even 2011,” he predicted.
Auto Sector: Robust demand on account of revision in the 6th pay commission and reduction in the interest rates. The dip in commodity prices has also reduced the input costs and helped improve margins and profitability
OMCs: Got a leg up due to steep correction in crude prices which
restricted their losses.
IT Sector: With hopes of US economy picking up and expectations of increased budgeting for IT expenditure by corporates has lead to re-rating of the IT stocks.
Pharma: Pharma stocks had not participated in the earlier rally of 2007. Considered to be value stocks with good degree of visibility and dividend yields.
FMCG: Like pharma, FMCG stocks are considered as defensives with good amount of visibility. Huge beneficiary of strong demand pick up in the rural areas.
A SundayET analysis of 50 stocks in the NSE Nifty Index, reveals that 13 stocks are currently trading above the prices they were quoting at as on January 10, 2008 on the stock exchange.
The composition includes three auto manufacturing companies (Hero Honda Motors, Maruti Suzuki & Mahindra & Mahindra), three IT entities (Infosys Technologies, TCS & Wipro), two pharma players (Sun Pharmaceutical Industries & Cipla), two FMCG giants (Hindustan Unilever & ITC), two oil & gas firms (Bharat Petroleum Corporation & Cairn India) and one bank (Punjab National Bank).
Stocks such as Hero Honda (121% up) and Maruti Suzuki (50% up), in fact, are quoting way above the levels they were trading at a year and a half earlier. “These stocks belong to the sectors — auto, IT, oil marketing, FMCG and pharma — which underperformed in the last market rally and were hugely under-owned from an investor point of view,” Anup Bagchi, executive director of ICICI Securities said.
The market had turned sour in 2008, which witnessed all the popular sectors namely, metals, infrastructure, and realty undergoing huge corrections as the momentum shifted to the defensive sectors such as FMCG and pharma.
“Markets have been positively surprised by the profits reported by auto companies such as Hero Honda, Maruti, M&M and Bajaj Auto (adjusted for demerger) and this has led to a price-to-earnings (P/E) expansion in these scrips,” Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services said.
Mr Oswal believes superior returns delivered by these stocks is primarily due to change in company specific fundamentals and partly because of P/E expansion. Put simply, the P/E is the ratio of the price per share to earnings per share.
Saibal Ghosh, chief investment officer at Aegon Religare Life Insurance, however, has a different view on the subject. He thinks it’s a case of too much money chasing too few quality stocks. “India is getting re-rated amongst foreign investors. The high earnings visibility is driving up the demand for them,” he said.
Stock market, analysts feel, could trade in a broad range going forward as large cap stocks have moved ahead of their fair value zone. The fair value of an index is arrived at by calculating the sum total of all the underlying values. It indicates how much price an investor is willing to pay for a stock at utmost.
Mr Oswal remains bullish on the Indian equity market despite the prevailing scepticism. “History repeats itself, but it’s very unlikely in the short to medium term — so what we saw in 2008 by way of demolition in stock prices is unlikely to be seen in 2009, 2010 or even 2011,” he predicted.
Auto Sector: Robust demand on account of revision in the 6th pay commission and reduction in the interest rates. The dip in commodity prices has also reduced the input costs and helped improve margins and profitability
OMCs: Got a leg up due to steep correction in crude prices which
restricted their losses.
IT Sector: With hopes of US economy picking up and expectations of increased budgeting for IT expenditure by corporates has lead to re-rating of the IT stocks.
Pharma: Pharma stocks had not participated in the earlier rally of 2007. Considered to be value stocks with good degree of visibility and dividend yields.
FMCG: Like pharma, FMCG stocks are considered as defensives with good amount of visibility. Huge beneficiary of strong demand pick up in the rural areas.
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