Lingering concern over rising inflation, fear of aggressive rate hikes by global central banks and heavy outflows by foreign institutional investors (FIIs) have dragged the BSE Sensex down by more than 16 per cent since October 19 last year, when the benchmark equity index scaled its fresh all-time high.
As a result, as many as 275 stocks in the BSE 500 index plunged over 20 per cent during the same period. Theoretically, a stock is said to have entered the bear’s grip when it tanks 20 per cent or more from its peak. With a fall of 70 per cent, Dilip Buildcon is the biggest loser on the list. It was followed by HEG (down 63 per cent), Indiabulls Housing Finance (down 63 per cent), Indiabulls Real Estate (down 62 per cent) and Sequent Scientific (down 60 per cent).
RBL Bank, Manappuram Finance, Vaibhav Global, Hikal, HLE Glascoat, Firstsource Solutions, IndiaMart InterMesh, Welspun India, Lux Industries, Zomato, Godrej Properties, Zensar Technologies and The New India Assurance Company also cracked over 50 per cent during the same period.
So, what investors should do right now considering the steepest fall in the domestic equity market? For investors who are fully invested, HDFC Securities said that this is not a great time as they watch their portfolio values eroding week after week. These investors can do a thorough review of their asset allocation and equity portfolio and carry out rebalancing by making necessary changes to the asset classes and equity portfolio. For rebalancing equity portfolios, they can wait for some intermittent bounces.
“These can be used to raise some cash which can be deployed when the current downtrend comes to an end over the next few months. While doing this, investors may have to take some losses on some stocks that have been bought at higher levels and where the potential for revisiting the earlier highs seem unlikely due to micro or sectoral developments,” the brokerage said.
For investors who are not fully invested or who have raised cash in the recent past by booking profits, HDFC Securities added that these times provide an opportunity to gradually raise the equity portion of their portfolio. “While shortlisting investable stocks one will have to be careful of not having exposure to sectors or stocks that have been derated due to very high valuations or very high financial forecasts that seem difficult to achieve. Also, stocks that did well due to commodity up run over the last one odd year need to be examined closely for the sustainability of earnings. Stocks that could see a feeble or elongated recovery also need to be avoided,” it said.
HDFC Securities also compiled a list of 14 stocks that can be accumulated over the next 3-6 months by medium-risk and high-risk investors to benefit from the current and expected weakness in markets. The list includes players like Bandhan Bank, Coal India, Coromandel International, DLF, Maruti Suzuki, SAIL, Tech Mahindra, Bharti Airtel, Cipla, ITC, ICRA, Mahindra & Mahindra, NTPC and TVS Motor Co.
“Nobody can catch a bottom and hence it is necessary to begin this process and achieve an attractive entry point by averaging on the downside,” HDFC Securities said.
On the other hand, Antique Stock Broking is bullish on HDFC Bank, Infosys, ICICI Bank, ITC, HCL Technologies, ONGC, DLF, Torrent Pharma and ABB, among others in the largecap space. In the broader space, the brokerage firm is positive on Trent, Coromandel International, Linde India, Sumitomo Chemicals, Cyient, NCC and Ganesha Ecosphere.