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Five out of the 50 stocks that make up the National Stock Exchange's Nifty index have not only underperformed the recent rally, but also they have lost money for investors even as the index rose more than eight per cent.
Ranbaxy Laboratories Ltd, Tata Power Co Ltd, HCL Technologies Ltd, NMDC Ltd and Jindal Steel and Power Ltd (JSPL) are the five stocks that clocked in negative returns. "The rally has been a broad-based one, with most sectors participating in it. The decline in these (five) stocks is mostly due to company-specific issues," said Vikas Khemani, head-institutional equities, Edelweiss Financial Services.
In the past month, the Nifty has moved from 5,700 to the current 6,100 levels, gaining 8.23 per cent. Expectations of interest-rate cuts, improvement in the macroeconomic parameters like the current account deficit, gross domestic product numbers and inflation and continuous influx of foreign funds kept the markets buoyant and on an upward trend, said experts.
But not all have done as well, either due to company-specific or sector-related problems.
Two of the stocks in the bottom five are from the metals and mining sector - JSPL and NMDC. Analysts said while these companies continue to be victims of a slowdown in demand in international markets, particularly in China, political issues on the domestic front have also been affecting them.
"With sponge iron market fundamentals failing to improve and the gradual improvement in the mining outlook in Karnataka (with incremental supply of sub-grade ore in the system), we expect NMDC to continue to face pressure on fines and lump prices," said a report on NMDC by Ritesh Shah and Anshuman Atri of Espirito Santo Securities, released earlier this month. The securities firm holds a 'sell' outlook on the stock.
Similarly for JSPL, the outlook remains negative among analysts. JSPL's expansion plans in Odisha and Chhatisgarh are on time. But analysts said with coal supply being low and power tariff unlikely to be increased anytime soon, the company's share price will continue to see a downside. With no further upsides to look forward to, investors are no longer interested in holding these, they added.
HCL Technologies, the third-worst performer, was the most promising stock in the sector 6-12 months ago. Lower costs, compared to its peers in the industry like Tata Consultancy Services and Infosys, had seen HCL gaining a higher share of new deals in the industry. Analysts said at one point, the company was competing directly with TCS.
"This saw the stock run up too quickly making it the outperformer in the IT pack. There has been a lot of profit-booking in the stock, owing to concerns over the Immigration Bill likely to be passed in the US," said Dharmesh Pancholi, deputy manager, Sharekhan Equity Advisory Team. In the last one-year, the stock has run up about 52 per cent.
In the case of Ranbaxy Laboratories, the gradually waning demand in the US for the cholestrol-lowering drug Lipitor had already reversed investor interest in the company. This, with the recent regulatory action and $500 million (Rs 2,770 crore today) penalty, saw the company's stock price fall further.
Meanwhile, Tata Power has been hit by rising fuel prices on account of a change in regulations in Indonesia, said analysts.
Of the 50 stocks, 24 others gave positive returns but underperformed the Nifty.
