HUL pips HDFC Bank to 3rd spot in market capitalisation; RIL remains on top

Consumer goods major is down 4.2% since Feb 20, against 33% fall of HDFC Bank

Hindustan Unilever (HUL), the country’s most valuable consumer goods maker, has overtaken HDFC Bank to become India’s third-most valuable firm in terms of market capitalisation. At Friday’s closing price, HUL’s market capitalisation was Rs 4.66 trillion, against HDFC Bank’s Rs 4.46 trillion. 

Reliance Industries and Tata Consultancy Services remained at the top with market capita­lisation of Rs 6.83 trillion and Rs 6.21 trillion, respectively. The Indian subsidiary of UK’s Unilever has been one the top performing stocks during the sell-off triggered by the global spread of the coronavirus disease (Covid-19). The firm’s market capitalisation had declined just 4.2 per cent since February 20, when the broader markets began to fall over fears of economic disruption. 

In comparison, HDFC Bank was down 33.1 per cent during the period, while the combined market capitalisation of Nifty50 stocks was down 31.2 per cent. The combined market capitalisation of Nifty50 stocks was Rs 62.44 trillion on Friday, down from Rs 90.77 trillion at the end of trading on February 20. Economic turmoil arising from Covid-19’s spread has upset the market capitalisation league on Dalal Street. Lenders yielded space to consumer and pharmaceutical stocks on the indices. As of Friday, there were two consumer companies, HUL and ITC, in the top-10 companies in terms of market capitalisation, as against one on February 20. Retail lender Bajaj Finance has dropped off the list and its market capitalisation was lower than Nestlé and Asian Paints. 

Analysts say this is because Covid-19’s impact was more on banks, compared with a mild impact on debt-free and staple goods manufacturers like HUL. “HUL has a business that offers steady growth and few downsides, thanks to its debt-free and cash-rich balance sheet. In contrast, lenders including HDFC Bank, face the risk of a spike in bad loans as the lockdown dries up cash flows of individuals and businesses across sectors,” says Dhananjay Sinha, head research & equity strategist at Systematix Group.

 

 

Sinha expects the trend to continue in the near- to mid-term. “The market expects a fiscal stimulus or big ramp-up in public spending, which will boost consumer spending at the lower end, benefitting companies such as HUL,” he added. Lenders, including private sector banks, have been the worst performers since a nationwide lockdown was announced, followed by metal and mining companies and automakers.

In contrast, pharmaceutical firms such as Cipla, Dr Reddy’s Labs, and Sun Pharmaceuticals, and food and personal care products makers such as HUL, Nestlé, ITC and Britannia have outperformed the broader markets by a wide margin. Cipla — the market leader in medicines for respiratory diseases — has been the top performer and its market capitalisation has risen 3.1 per cent since February 20. This is because Covid-19 largely affects the lungs and respiratory tract, and investors expect a surge in demand for Cipla’s medicines and inhalers. It was followed by Dr Reddy’s, which was down 3.4 per cent, and HUL, which made up the top three performers.