Over the past two months, stocks of multinational companies (MNCs) have outrun the broader markets by gaining up to 100 per cent. The Nifty MNC index has gained 31 per cent from its March low, against 29 per cent rise in the Nifty50 index. Even on a year-to-date basis, the fall in the Nifty MNC index at 8 per cent is less than the Nifty50 index, which slipped 19 per cent during this period.
Vodafone Idea, Oracle Financial Services, Sterlite Technologies, Britannia Industries, Nestlé India, Honeywell Automation, Maruti Suzuki India, and United Spirits from the Nifty MNC index have rallied over 30 per cent.
GMM Pfaudler, Bayer CropScience, and AstraZeneca Pharma India are some of the non-index MNC stocks that have rallied between 50 per cent and 85 per cent during this period.
The outperformance of MNCs has seen 19 such stocks grab a spot in the top 100 list of companies by market capitalisation, compared to 14 companies as on January 20, 2020, when the benchmark indices hit their all-time high.
Stocks of MNCs have been driven higher by two key factors – liquidity in the markets and delisting hope. There have been expectations that some MNCs may look to delist from the Indian bourses, which caught investors’ attention.
“Companies with pedigree and sound business model will continue to do well. One needs to evaluate on a case-by-case basis and accordingly take an investment call. But broadly, one can stay invested for now,” said G Chokkalingam, founder and managing director, Equinomics Research & Advisory.
MNC firms are traditionally known for strong parentage, technological proficiency, and asset-light business models. They are usually well-capitalised, have low debt exposure, and good dividend policies. The Budget 2020 proposed for the abolition of dividend distribution tax (DDT), but it still gets taxed in the hands of recipients or unitholders. The firms giving out rich dividends to consumers and with substantial foreign shareholding will stand to benefit from the removal of DDT, said analysts.
“Over the past few years, MNC stocks in the fast-moving consumer goods and pharma categories have risen, as companies have penetrated the Indian markets well. Such stocks will continue to do well. On the other hand, those engaged in construction have languished. In uncertain times, like Covid-19, investors tend to flock towards safety, better disclosure norms, where some MNCs score over home-grown names. Besides, they also dole out healthy dividends,” said A K Prabhakar, head of research, IDBI Capital.
For the financial year ended December 2019, Sanofi India had announced a total dividend of Rs 349 per share, including a one-time special dividend of Rs 243 per share, while Nestlé India recommended a final dividend for 2019 of Rs 61 per share. Both companies follow the January-December financial cycle.
For 2019-20, SKF India, too, declared a special dividend of Rs 130 per share, while Bosch recommended a dividend of Rs 105 per share. Honeywell Automation India and Maruti Suzuki India declared a final dividend Rs 75 and Rs 60 per share, respectively. All these stocks are yet to turn ex-dates for their respective dividend.