Stock gains skewed this samvat

SMARTSHARE

As we get ready to say goodbye to Samvat 2063, we are reminded of the ecstatic times this market has seen during the reign of Ketan and Harshad in the Samvat 2055 and 2047 respectively.

For the uninitiated, it refers to the 1999-2000 and 1991-92 rallies. Some of the stock prices these days look too good to be true. You have to pinch yourself that you are not dreaming.

How would you otherwise explain the out-of-this-world returns of Jai Corp (6297 per cent) from Diwali last year, 21 October, 2006 till November 1, the date of our study. And it's not alone.

You have Innova Food, a nondescript stock, which returned 2923 per cent, and the better known Orissa Sponge, which returned 2017 per cent. Fourteen stocks have appreciated by more than 1000 per cent this Samvat, with Walchand and MMTC being the only better known stocks.

The Sensex has appreciated by 54.86 per cent this Samvat. Last year, we had seen a higher appreciation of 60.33 per cent. But we find that on individual counters, there have been more noteworthy developments this year. In the last Samvat we had only four stocks that gave returns of over 1000 per cent.

And yet, many investors have lost money this Samvat! Those blue chips of the yesteryears like Colgate, Glaxo, Ingersol Rand, Monsanto, all of them have given negative returns to their investors. Home grown companies operating in sectors that receive a lot of government subsidy have also not done well. Punjab Tractors lost money for its investors.

And I am not talking about the oil marketing companies and the software stocks, which have been beaten black and blue by the government policy and an appreciating rupee, respectively. While the oil marketing companies have been pariahs all along this rally, the software majors are being increasingly shunned.

Last Samvat, 29 of the 30 Sensex stocks had given positive returns, with the sole exception of Reliance Energy which had lost money for investors. Three Sensex stocks, Grasim, BHEL and ACC, had given more than 100 per cent returns.

This year, Reliance Energy, the laggard of last year, has appreciated 283 per cent and L&T 246 per cent. Three other stocks, Reliance Industries, BHEL and Reliance Capital have given 100 per cent plus returns.

But what is more astounding is that eight Sensex stocks delivered negative returns. The list, in ascending order of losses, reads as follows: TCS , ITC, Infosys, Wipro, Bajaj Auto, Tata Motors, Hindustan Unilever and Cipla.

One thing common among the two Samvats was that capital goods as a sector continued to lead the way. After having returned 86 per cent in Samvat 2062, the BSE capital goods index has further appreciated 136 per cent this year.

Metals and oil and gas indices also did pretty well for the last two years. Among the sectors, health, FMCG and automobiles have delivered pathetic returns this Samvat, while the IT index has lost in value.

Of the 2,224 stocks that were traded on last Diwali and November 1 this year, 34 per cent of the stocks beat the Sensex.

As compared to that, 37.5 per cent of the schemes that are benchmarked against the Sensex could beat it. So much for the professional skills of fund managers. The performance of schemes benchmarked against the Sensex was worse off last Samvat with only 30 per cent of them being able to beat the benchmark.

Though past performance is not an assurance of future growth, the top five performing schemes in Samvat 2062 were able to beat the Sensex in Samvat 2063 as well. That shows that if investors do their proper homework, it is possible to invest money effectively.

As we usher in the new Samvat next week, a piece of advice. Investors can get carried away by the rising prices of the stocks they own and begin to feel richer and start spending more.

Celebrate and splurge as much as you want, but if the newfound confidence emanates from the price of a stock that has recently gone to the moon, please sell that piece of paper first.