3 years of Modi govt: 234 BSE500 stocks rally over 100%

Almost one out of two stocks from BSE500 index has become a multi-bagger in past three years after Narendra Modi led National Democratic Alliance (NDA) won the Lok Sabha elections on May 16, 2014. As many as 234 stocks that comprise the S&P BSE 500 index have risen over 100% since then.

At the index level, the S&P BSE 500 index has surged 47% as compared to 26% rise in the S&P BSE Sensex during this period. BSE-500 index represents nearly 92% of the total market capitalization on BSE.

Of these 234 stocks, 10 stocks, including Indo Count Industries, Caplin Point Laboratories, 8K Miles Software Services, Minda Industries, Can Fin Homes, ITD Cementation, TVS Srichakra, Force Motors, Aegis Logistics, Gayatri Projects and KPR Mill, have rallied over 1000% each.

RBL Bank, Manpasand Beverages, Mahanagar Gas, Infibeam Incorporation, Advanced Enzyme Technologies and Dilip Buildcon that debuted at the bourses, have surged more than 100% against their respective initial public offer (IPO) price.

Over half, or 319 stocks from the BSE500, have outperformed the index by gaining more than 50% during the period.

Maruti Suzuki (India), UltraTech Cement, TVS Motor Company, Motherson Sumi Systems, Adani Transmission, Godrej Industries, Indian Oil Corporation and Finolex Industries are among 25 stocks from BSE500 index trading at their record highs on BSE.

Though analysts remain bullish on the road ahead for the markets, they caution against the sharp rally, especially in the mid-cap segment. Progress of monsoon, impact of implementation of goods and services tax (GST) bill on the economy and corporate profits, inflation trajectory and corporate earnings growth are some of the domestic factors they remain mindful of.

“We continue to believe that the broad indices like the S&P BSE Sensex and the Nifty 50 may not fall badly in the short-term as the monsoon is expected to be normal and has already hit Andaman and Nicobar islands. Fuel consumption has also come back in the positive growth zone in the month of April. Having said that, we continue to caution our clients to have tilt towards large cap stocks as there is no valuation comfort in many mid cap stocks,” explains G Chokkalingam, founder and managing director of Equinomics Research & Advisory.

Adding: "There are many mid-cap stocks that have zoomed multi-fold and trade at exorbitant PEs, but the average trading volumes in such stocks is thin. Investors should be very cautious about the mid cap stocks which have PE multiples ranging in excess of 30 for FY2017 and also do not show any significant growth in their profits, but average trading volumes are very thin."

 

FII INVESTMENT

The sharp 26% market rally since Narendra Modi won the election (May 16, 2014) has been fuelled by the gush of liquidity as foreign institutional investors or FIIs and domestic mutual funds (MF) pumped in a net over Rs 3-lakh crore in Indian equities.

While MFs pumped in Rs 1.8 lakh crore, while FIIs made net investments of Rs 1.38-lakh crore into equity market since then.

“The Indian market was earlier extremely vulnerable to direction of foreign portfolio investment flows. Over the past three years’ growth in domestic institutional assets under management, especially MFs, has changed this scenario. We believe, this sticky fund flow will enhance market depth and is supportive of equity markets in general,” says Sahil Kapoor, chief market strategist at Edelweiss Investment Research in a note co-authored with Shobana Krishnan.

“The next leg of uptick is expected to be driven by revival in earnings. Nifty is likely to touch 10,000 in FY18 based on EPS growth of 15-20% over the next one year,” he adds.