Even since BSE Sensex came off its February 16 high and Covid cases started surging, the 10 most-valued stocks on Dalal Street have continuously underperformed the broader market. A breakup of the BSE500 stocks suggests as one goes further down the market-cap order, stock performances have improved incrementally.
For example, eight of the top 10 stocks have delivered negative returns since February 16, plunging up to 17 per cent, even as their combined market value fell 5.81 per cent.
But that has not been the case with the next 90 most-valued stocks which delivered 3.6 per cent return, with 48 stocks (53 per cent) logging positive returns.
ETMarkets.comHere’s how the BSE 500 universe has fared during this period.
Stocks whose market capitalisation ranked between 101th -200th positions in the BSE500 basket logged a similar 3.4 per cent return, but this time 61of them delivered positive returns.
The ones that ranked between 201st -300th, in fact, delivered 5.94 per cent return for this period, data compiled by ETMarkets.com showed. Sixty-three of these 100 stocks clocked gains in the nearly three-month period.
Returns delivered by stocks ranked 301st to 400th in terms of market-cap remained healthy at 4.33 per cent, with 59 delivering positive returns. Meanwhile, smallcaps ranked from 401st to 501st (BSE500 has 501 stocks) delivered 1.38 per cent return since February 16, with 55 stocks (or 54 per cent) ending higher – still better than top 10 stocks.
Overall, 288 of the 501 BSE500 stocks have delivered positive returns since February 16. Daily Covid cases in this wave have jumped multi-fold to hit the 4.14 lakh in the past 24 hours from 11,600-odd levels in mid-February.
“One possible reason for this trend could be the fact that new small investors are still coming into the market in a big way. If you go down, say, beyond top 500 stocks, you will find many smallcaps have delivered huge returns. On the other side of it is foreign portfolio investors, which have been selling domestic stocks, which mainly comprise largecaps,” said G Chokkalingam, Founder and MD of Equinomics Research & Advisory.
At Rs 1,940, BSE’s most-valued stock
(RIL) is down about 6 per cent from its February 16 closing price of Rs 2,059. The second-most valued stock, , is down 0.41 per cent; , the third most valued stock, is down 14 per cent. HDFC is the worst hit among the Top 10, falling 17 per cent. Kotak Mahindra Bank (down 12 per cent), SBI (down 12 per cent) and ICICI Bank (down 8 per cent) are among the others bearing the brunt.
Sunil Subramaniam, MD and CEO at Sundaram Mutual, said it is a good time to book profit in smallcaps. He advised investors to shift to midcaps. “Largecaps will be volatile because of FII outflow. Midcaps are actually in a sweet spot,” he told ETNOW.
Chokkalingam said he expects midcap and smallcap stocks to outperform over the next few months. He, however, warned that one should invest cautiously and must not deviate from valuation multiples.
“Don’t give huge valuation multiples to cyclicals, say chemicals or maybe sugars, which are not sustainable in my view,” he said.
