As the Sensex crossed the 26,000 level on Monday, there was jubilation all around. But there are many investors — with investments in non-Sensex stocks — sitting on large losses, fretting about the missed opportunity. Goenka Diamond and Jewels, Era Infra Engineering, Shree Ganesh Jewellery, Kingfisher Airlines, Jet Airways and REI Agro are down 40-80 per cent since September.
The BSE 500 index is up 41 per cent since September. However, 53 of the stocks are in the negative territory in this period.
In the Sensex pack, ITC is the only stock that is trading lower than the level in September. Reports that the Government is considering an exceptionally steep increase in excise duty for cigarette makers in this Budget has pressured the stock.
There is no sector bias in the list of underperformers. Stocks from across sectors, such as jewellery, pharma, textiles, FMCG, telecom, steel, and capital goods have their representatives in the list.
Weak sales, profits Companies in this bunch have either recorded very weak sales and profits in some quarters — as in Era Infra Engineering, Jet Airways and Kingfisher Airlines — or have been bogged by negative sentiments due to change in regulations (Shree Ganesh Jewellery — after change in gold lending norms by RBI, Idea Cellular — after higher prices paid in spectrum auction).
Companies that are neck deep in debt such as REI Agro and Kingfisher Airlines have also been abandoned.
Institutional selling Price corrections appear to have followed institutional selling in most cases. In Shree Ganesh Jewellery for instance, FII holding has come down to 7.37 per cent in March from 8.44 per cent in September 2013. Jet Airways, Era Infra Engineering, Strides Arcolab and REI Agro are a few other stocks where there has been heavy FII selling. In Kingfisher Airlines, domestic institutional holding has dropped to 10 per cent in March from 12.6 per cent in September.
“Institutional selling could have been triggered by sharp price correction in stocks,” says Shrikant Chouhan, Senior Vice-President & Head of Technical Research, Kotak Securities. “Institutional selling in some stocks could be after selling by banks of the pledged shares of companies on price correction.”
But, will these laggards now play catch up?
Broader trend bullish Shrikant Chouhan says, “Our advice is not to sell them in the near-term because the broader trend of the market is bullish.
“The economy should do well based on the reforms process that has started from the ruling Government and that will help small size businesses. However, if there is any corporate governance-related problems in these stocks, investors should exit them.”