Stock Market

Multibagger trap: Star performers of 2018 that turned out to be wealth destroyers in 2019

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The biggest winners of Calendar 2018 all remained under pressure in Calendar 2019 despite the record-setting spree of equity benchmarks Sensex and Nifty. Over 75 per cent of last year’s multibaggers destroyed wealth this calendar.

Thirty-four stocks that had delivered manifold returns last year fizzled out in 2019. Just like 2019, Calendar 2018 too was a painful year for Dalal Street, as only 390-odd stocks managed delivered positive returns to investors while over 2,000 scrips destroyed investor wealth. Chemicals manufacturer Sadhna Nitro Chem was the star performer of 2018, surging over 830 per cent from Rs 47.4 on December 29, 2017 to Rs 440.6 on December 31, 2018.

In 2019, the scrip lost over three-fourths of its value to trade at Rs 106.1 on December 20, 2019. Similarly, stocks like Gujarat Poly Electronics, Sakuma Exports, GSS Infotech, Sangal Papers KIC Metaliks, A Infrastructure and Birla Cables surged over 200 per cent in 2018, but lost up to 80 per cent in 2019. “This happens invariably in a bull market,” says G Chokkalingam of Equinomics Research and Advisory.

“Some microcaps create multibagger opportunities and eventually, their market-caps rise in the long term.

But most of them do not sustain the valuation bubble and crack from their peaks,” he said. Among others Apollo Finvest, Vikas Proppant - Granite, Mitshi, Procter - Gamble Health, Maestros Electronic - Telecom and Accel surged 100 to 460 per cent in 2018 and again delivered returns in excess of 20 per cent in Calendar 2019.

BSE benchmark Sensex is on course to end the year with a gain of around 15 per cent. “Most of the multibaggers of last year were microcaps, and very few investors could get a taste of them.

Usually, retail investors get stuck in such names at higher levels and their panic leads to wealth erosion,” said Abhimanyu Sofat, Head of Research, IIFL Securities. Yet some stocks like Dolat Investments (up 800 per cent in 2018), Darjeeling Ropeway (up 698 per cent in 2018), Valiant Organics (up 140 per cent in 2018) and Responsive Industries (up 125 per cent in 2018) managed to hold the fort and fell only marginally in 2019. “Investors should judge a company on various parameters like promoter holding, share pledge levels, overall debt levels, working capital, adequate physical assets and liquidity before making an investment call,” said Chokkalingam. “Many of the stocks that saw temporary rallies were not backed by fundamentals.

They may show good results in a quarter or two, but consistency in financial performance is an issue with most of them.

Therefore, the rise and fall in such stocks is always steep,” said Sofat of IIFL.




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