Over 25 stocks lose largecap tag in market meltdown; time to buy or stay away?

Sensex has lost more than 30 percent so far this year, that's nearly 13,000 points, and is down about 33 percent from its record high of 42,273 registered on January 20.

The average market capitalisation of BSE-listed companies has come down by more than Rs 40 lakh cr in the same period. Tracking the sell-off in markets, nearly 30 companies have turned into midcaps from largecaps in the same period as fears of economic slowdown gripped equity markets across the globe.

We have categorized largecaps as companies with a market capitalisation of over Rs 20,000 cr as on January 1. As per the Amfi calculations, the top 100 stocks in terms of market capitalisation are classified as largecaps and the market-cap is usually over Rs 20,000 cr.

There are as many as 27 companies in BSE500 index whose market capitalisation has fallen below Rs 20,000 cr as on March 16, 2020, data from AceEquity showed. The list includes names like Adani Transmission, Adani Power, Canara Bank, Bank of India, LIC Housing, Shriram Transport, Bharat Forge Ashok Leyland, etc. among others.

So what should investors do now? After the recent decline which is primarily led by external factors, massive wealth erosion has happened on D-Street. Does that make some of these stocks an attractive buy?

Well, experts are of the view that some of the companies which have turned midcaps from largecaps can be looked at as a buy candidate but not every stock or a company is looking attractive.

“A lot of largecaps have seen their market caps drop, purely driven by the market sentiment and external shocks. However, not all of them are Buys currently, because some of them also have lost out due to governance issues and other uncertainties,” Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.

“So all of them are not automatic buys. Only those that are fundamentally strong and with higher localized business may be considered for accumulation in this market scenario,” he said.

Specifically, if someone is looking to buy in some of the companies from the list then Bata and PI Industries along with Gillette are looking attractive, suggest experts.

“Talking about the specific stocks from the list we like Bata India, PI Industries and Gillette India. We would advise investors to start accumulating these 3 stocks from the list,” Atish Matlawala, Sr Analyst, SSJ Finance & Securities told Moneycontrol.