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Last Updated : Dec 23, 2019 01:50 PM IST | Source: Moneycontrol.com

Year 2019 in review: More wealth destroyers than creators; 45 stocks lost 50-95%

Currently, BSE Midcap and Smallcap are down 19 percent and 34 percent, respectively, from their respective all-time highs touched in January 2018, when the BSE Sensex is at its peak

Sunil Shankar Matkar

Broader market largely traded in the negative territory in 2019 though the benchmark indices hit record highs. And that is the main reason why we have seen more wealth destroyers than wealth creators during the year.

Rally of 15.6 percent on the BSE Sensex and 13 percent on the Nifty50 seen during the year was largely driven by a few stocks.

The underperformance seen in the broader markets was largely due to their high valuation, economic slowdown and muted earnings growth.

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The BSE500 index gained 8 percent during the year, but wealth destroyers were more in number than the wealth creators which was clearly visible in ratios of BSE500 (63:37), BSE Midcap (57:43) and Smallcap (75:25).

More than 300 stocks out of BSE500 showed negative return, of which 237 stocks fell in double digit.

Lowest 45 stocks corrected 50-95 percent which included Reliance Capital, Reliance Communications, DHFL, Reliance Infrastructure, Jet Airways, Reliance Power, Jain Irrigation and Coffee Day Enterprises.

In fact, some of their trading price is in single digit now. The major reason for correction was their high debt burden and corporate governance issues.

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But the scenario is expected to change in the coming year due to the effect of government measures announced recently and likely to be announced (in Budget) going ahead, experts feel.

Currently, BSE Midcap and Smallcap are down 19 percent and 34 percent, respectively, from their respective all-time highs touched in January 2018, when the BSE Sensex is at its peak.

"But we should not be concerned by the fact that only a few set of stocks & sectors have edged main indices higher while broad market is dull. We feel that the momentum of the market will get more powerful due to factors like, high expectations on Budget, better inflows in CY2020 and lower risk in domestic market," Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.

Ajit Mishra, VP Research at Religare Broking believes 2020 would be a year where recent measures taken by the government would start showing desired results. "Eventually, this would result in demand recovery and economic growth as well as improve corporate earnings. Further, investors are expecting more such reforms in the upcoming Union budget which could further boost their sentiments," he said.

Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor also said in the next year, Union Budget and GST amendments are some of the key factors that can help boost midcaps. "Revocation of angel tax is already a step towards attracting new startups. Along with this a few more additions to the ‘Make in India’ campaign will help the midcap index expand."

Hence, experts expect more wealth creators than wealth destroyers in 2020 following likely participation from midcaps and smallcaps.

"We expect less wealth destroyer as now valuation premium between mid-small caps and largecap has narrowed considerably. Also, sentiments around mid-smallcap stocks have stayed negative due to multiple corporate governance issues that have surfaced during the last two years, but we believe the fear has gone ahead of reality," Vineeta Sharma, Head of Research, Narnolia Financial Advisors said.

"In a relative sense, mid-smallcap stocks are now trading at levels from where if economic growth revives and the interest rate falls, then 2020 would be a year of base building from where outperformance of mid-smallcap starts," she added.

Gaurav Garg also expects 2020 to be more favourable for the wealth makers than for the destroyers, and in the coming year it is predicted that mid and small caps will gain momentum.

Ajit Mishra said as he believes midcap and smallcap counters to do well and expects broad-based participation, investors should focus on companies with good corporate governance, strong fundamental track record and attractive valuation.

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Dec 23, 2019 01:49 pm
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