INSUBCONTINENT EXCLUSIVE:
Sometimes, low-level buying without proper research can lead to further wealth destruction in the equity market
This is the biggest lesson Dalal Street taught you in Calendar 2019.
Take this: Some 127 stocks eroded up to 95 per cent of investors’
wealth in 2018, and most of these again retreated up to 75 per cent this year as well.
Buying in select blue chips took Sensex and Nifty
higher by over 15 per cent year to date, while the midcap index is down 4 per cent and the smallcap index 9 per cent.
Global trade tensions,
market-cap reclassification for mutual funds, intensified liquidity crisis amid a series of NBFC defaults investors at bay
As a result, as many as 85 per cent of stocks failed to deliver positive returns to investors in 2018.
The picture was no different this
year too.
Among the popular names, stocks of Cox - Kings, McLeod Russel, LEEL Electricals, Reliance Capital, DHFL, Reliance Communication,
Reliance Home Finance, Sintex Plastics, Jet Airways, Sintex Industries have tanked over 90 per cent in 2019.
They had lost up to 95 per cent
of their values in 2018.
"Majority of these stocks became wealth destroyers as they faced major risks like corporate governance issues, debt
crisis or high levels of share pledging
It is not wise to expect them to create wealth again, as the wealth destruction is permanent,” says G Chokkalingam, Founder, Equinomics
Research and Advisory.
Only 11 names out of the 127 that bled profusely through all of 2018 were able to deliver positive returns this year
The list included Krishna Ventures, which surged over 200 per cent in year 2019 after falling about 98 per cent in 2018.
The stock traded at
Rs 169 on December 29, 2017, fell to Rs 4.1 on December 31, 2018 and bounced back to trade at Rs 12.6 on December 20, 2019
Jyoti Structures and SRK Industries each surged over 50 per cent in 2019 after falling 85 per cent last year.
Among others, Meenakshi
Enterprise, Vakrangee, Pawansut Holdings, Natco Economicals, Pincon Spirit, Gitanjali Gems managed to deliver positive returns this calendar
after eroding three-fourths of their wealth in the previous year.
Stocks like Gradiente Infotainment, Parle Industries, Brightcom Group, A-M
Febcon, GB Global, Reliance Nippon Life AMC, Authum Investment, BIL Energy and Tanla Solutions doubled investor's wealth in 2019 after
falling up to 65 per cent in 2018.
"In last two years, fund allocation has been limited to a handful of stable and quality names
Most of them belong to the largecap space
Also, reclassification stock market capitalisation for mutual funds led to the carnage in the second-rung stocks,” said Vinod Nair, Head
of Research, Geojit Financial Services.
"Some companies may have delivered returns this year after cracking last year
This may have happened due to speculation as retail investors have a habit of chasing penny stocks
Only a few of them succeed, while the rest end up leaving investors trapped," Said Chokkalingam.
Big gainers of 2018, like Vikas Proppant -
Granite and Apollo Finvest, continued their stellar show in 2019, surging over 75 per cent
Bata India, Bajaj Finance, Maurya Udyog and Arman Financial are some stocks that surged over 50 per cent in both the years.
Nair is
confident about India Inc’s growth story and believes midcaps and smallcaps will outperform once the dust settles.
“The government has
announced various measures to revive the economy
Corporate tax cuts, monetary stimulus and other structural reforms will revive the economy and set the stage for a major turnaround,” he
said.
Amar Ambani, Senior President and Research Head, YES Securities, told ETMarkets.com, that the two big lessons he learnt from 2019
were; first, commodity stocks should be sold at a bumper profit, and second, don’t fall in love with the stock you own.
“One should not
be too cute to the stocks she owns
Sometimes when the very rational of your entry into a stock is weakening, you should act fast and exit the stock rather than think that the
market is yet to discover the fact and maybe the stock will rise some more before it falls,” said Ambani.
