Bear Market Woes: 83% of Nifty 500 stocks give negative returns in 2022

Nifty 50 stocks such as Hindalco Industries, Tata Steel, BPCL, IndusInd Bank, Shree Cement, HDFC Bank, Asian Paints, Wipro, Infosys, HDFC, HCL Technologies, Bajaj Finance, Tata Consultancy Services, Tech Mahindra, and Grasim Industries hit one-year lows recently. All these stocks are down between 8-40 percent this year.

"The broader market has been under pressure mainly due to the heavy FII selling. Concerns of premium valuation and higher impact of inflation on their profitability led to sharper fall in broader markets" said Sneha Poddar, AVP, Research Analyst, Broking and Distribution, MOFSL

However, the sharp correction in the market is also being seen as an opportunity by some market participants.

“I think it's the right time for long-term investors to add to good growth stocks, which are available at attractive valuations,” Narendra Solanki, Head-Equity Research (Fundamental), Anand Rathi Shares & Stock Brokers, said.

Solanki believes investors should continue to hold existing stocks in their portfolios, if growth prospects of the company are intact as the “current volatility is more in the short-to-medium term, while long-term prospects for our economy remain promising”.

Analysts attribute the negative or low returns in some popular consumer durables, auto, banking, realty and metal stocks that are actively traded in futures and options (F&O) on the perception that higher cost of borrowing and product prices will hurt demand at a time when companies are grappling with persistently high input prices.

Metal stocks have already been under pressure since the government’s decision to impose export duty on steel to cool domestic prices.

Among IT stocks, volatility in the global markets amid higher inflation and expectations of tightening by central banks, along with the Russia-Ukraine war, which is unlikely to end soon, may see a slowdown in order books. Most Indian IT companies are moving their operations out of Russia, while helping clients maintain business continuity by shifting work to other locations. This is likely to increase margin pressures further, analysts said.

Oil & gas stocks were under pressure as investors feared that interest rate hikes from major central banks could slow the global economy and cut demand for energy.

Vikram Kasat, Head-Advisory at Prabhudas Lilladher expects markets to remain volatile for the next three months as he believes inflation is likely to remain high and geo political tensions will not end soon.

"We believe that inflation expectations have run ahead of themselves and the scaling back of consumption through increasing interest rates and tightening liquidity would result in inflation softening. However, markets have typically moved either sideways or down during this process. Nifty is also currently trading at 19x forward assuming a 10 percent cut in earnings, which does not give a screaming ‘buy’ yet,” said Vinit Bolinjkar, Head of Research, Ventura Securities.