As many as 3,018 second-rung stocks eroded investors’ wealth in March amid the ongoing correction in broader markets. Where the BSE Smallcap index tanked 8.27% since February 29, the BSE Midcap index retreated 4.03% in the same period. On the other hand, the benchmark equity index BSE Sensex declined just 0.55%. Market watchers are cautious about the broader markets for the near term, citing valuation concerns.
As many as 389 stocks have seen a decline of more than 20% so far in March. With a fall of 58.42%, Growington Ventures India was the biggest laggard. It was followed by Thinkink Picturez (down 50.91%) and Raghuvansh Agrofarms (down 50.61).
Shree Precoated Steels, Genpharmasec, India Pesticides, IIFL Finance, Innokaiz India, Vaswani Industries, Duke Offshore, SGN Telecoms, Toyam Sports, Santosh Fine-Fab, and UH Zaveri also declined somewhere between 40% and 47% during the same period.
Sharing his views on the broader markets, Siddhartha Bhaiya, Managing Director and Chief Investment Officer, Aequitas Investments said, “The small- and mid-caps have gone through a golden four-year period since Covid-19. Because of the quantitative easing done by the governments, large sums of money have flowed into the stock markets, so much so that banks have been struggling with the deposit rates. The small- and mid-cap indices are up 4-4.5 respectively during that time. There are a lot of excesses in the markets right now. We have seen a plethora of IPOs particularly in the SME space; massive amount of promoter selling.”
He added that valuations are the most important aspect of our investment framework. “The valuations in the small- and mid-cap space have been out of our comfort zone for a while, which is why for the past four months we have taken a cautious approach by not accepting fresh funds. We have created 25% cash,” Bhaiya said, adding they are slightly cautious about the short-term future of the markets, though he remained bullish on the overall economic growth.
Among the other major losers, Balaji Telefilms, IL&FS Engineering and Construction Company, Eastern Logica Infoway, Sanmit Infra, Norris Medicines, Classic Leasing & Finance, BLS Infotech, Tiger Logistics (India), Mufin Green Finance, Sarvottam Finvest, Sindhu Trade Links, Rajnish Wellness, and DSJ Keep Learning also declined more than 35% in March till date.
Divam Sharma, Founder and Fund Manager at Green Portfolio said, “We have witnessed a sharp fall in the small-caps. Valuations have been corrected, and many companies that were earlier on our ‘hold’ list have returned to our ‘buy’ list. Even though the indices have been corrected by single digits, there are stocks in the market that have corrected by more than 50%. Like always, we are noticing that stocks that have climbed the fastest without any fundamental reasoning have been the ones facing the brunt.”
“We love proxy plays, so that means there can be good opportunities in most industries. Some of the sectors we are currently looking at are telecom, infrastructure, and chemicals. We’re not going towards mainstream companies because of prevailing valuation concerns. We’re going deeper into value chains instead to generate alpha,” Sharma added.
Achin Goel, Vice President of Bonanza Portfolio said, “We are positive on health care, information technology, manufacturing, infrastructure, renewable energy, and defence sectors.”
“Segments like cybersecurity, artificial intelligence and emerging technologies hold growth potential for the information technology sector. We are bullish on mid-cap IT companies given their aggressive pricing policy and lower deal size which enables them to capture good market share. In addition to this, the ongoing shift towards clean energy presents opportunities for companies involved in solar, wind, and other renewable technologies,” Goel said.
Meanwhile, overseas firm Jefferies recently shared 11 ideas which may deliver 15-25% compound annual growth rate (CAGR) returns over the next 5 years. These include stocks such as Amber Enterprises, Ambuja Cement, Axis Bank, Bharti Airtel, JSW Energy, L&T, Macrotech, Max Healthcare, SBI, TVS Motors, and Zomato.
Reference Link:- https://www.businesstoday.in/markets/stock-picks/story/rocky-road-for-investors-3000-stocks-fall-as-bse-smallcap-midcap-tank-up-to-8-422380-2024-03-21