Big gains in small pockets! Over 70 stocks rose up to 100-1000% in Samvat 2073

The S&P BSE Sensex rose a little over 16 percent to hit a fresh record high of 32,687.32 so far in Samvat 2073. Investors couldn’t have hoped for a better closing to Samvat 2073. But, there was plenty of action in individual stocks.

Benchmark indices might have given high teen growth rate but there were plenty of stocks which more than doubled investors’ multiple times in the same period.

Samvat 2073 saw the markets notching all-time highs, fuelled by sustained buying support from the domestic investors and robust global market sentiment.

The BSE mid-cap and small-cap indices have outperformed during this period and have returned about 18 percent and 25 percent so far in Samvat 2073, respectively.

Several stocks in the small and midcap space have more than doubled in the same period. In the S&P BSE 500 index, as many as 24 stocks rose between 100 to 1000 percent in the same period.

Stocks which rose up to 1000 percent in the S&P BSE 500 index include names like Indiabulls Ventures, Bombay Dyeing, Future Retail, Dilip Buildcon, KRBL, Motilal Oswal Financial Services, KEC International, Jindal Steel & Power Ltd, and JSPL etc. among others.

In the S&P BSE Smallcap index as many as 72 stocks rose between 100 to 1000 percent which include names like HEG, Graphite India, Venky’s, Bombay Dyeing, Shakti Pumps, V-Mart Retail, KEI Industries, Visaka Industries, Sterlite Technologies, Indiabulls Real Estate, LT Foods, Edelweiss Financial, Chambal Fertilisers etc. among others.

The smallcap index has been on investors’ radar for the past few years largely on the back of strength in economy and pro-growth policies initiated by the government. Stable macros added to rupee strength which attracted lot of buying interest from foreign investors.

The rally is far from over as smallcap stocks are in a young and vibrant bull market, Shankar Sharma of First Global said in an interview with CNBC-TV18.

“I had a view of policy that there would be some growth, but not enough to propel the whole basket of largecaps. But, smallcaps don’t need that. Smallcaps need 3-4 percent GDP growth for Rs 100-500 crore company to go to Rs 1,000 crore company,” said Sharma.

Investors get attracted to smallcaps in a high growth environment. And, even though, expectations of sharp growth rebound is not expected due to demonetisation and implementation of the goods & services tax (GST), smallcap stocks will still hog the limelight.

“I made a distinction long time back that forget about largecaps and smallcap is the space where one needs to go. But, interestingly after huge outperformance, I don’t think that smallcaps are in a mature bull market,” he said.

Among the Nifty50 names, Bajaj Finance rose 80 percent, followed by Hindalco Industries gained 76 percent, Tata Steel rallied 70 percent, RIL spurts 66 percent, and HUL rose 50 percent so far in Samvat 2073.

On the domestic front, the sudden implementation of demonetisation saw a sharp dip in sales of discretionary items like Auto, Consumer durables, Real Estate and Building Products, Travel and Jewellery.

“While there were fears of an extended impact on the economic growth, such fears were largely belied and even the markets bounced back from their lows. Market sentiment was further buoyed by the strong election outcome in UP for the ruling NDA government,” Kotak Securities said in a report.

Abolishing the earlier system of excise and sales tax, the government implemented the GST tax from July 1, 2017. “However, prior to the scheduled rollout, there was significant uncertainty among wholesalers/retailers related to the availability of input tax credit (under GST) on existing inventory,” said the report.

The impact of this was reflected in the Q1FY18 earnings numbers. Profits of Nifty companies declined 8.4 percent in Q1FY18. Some moderation in GDP growth was also observed in Q1FY18 which was at least partly attributed to rollout of GST.

“The market seems to be mesmerised in festive mood and is overlooking the muted performance of the companies coming out with numbers. Banks considered as the barometer of the health of the economy have delivered pathetic performance especially the smaller ones,” Jimeet Modi, CEO at Samco Securities told Moneycontrol.

“IIP number are showing mixed to negative trend and therefore the corporate numbers too should be a mixed outcome. Few sectors that look promising from a one year horizon are Gas and Gas Distribution companies, Agri and Agri Inputs, and pharma sector,” he said.