Twitter
Advertisement

'Build India' stocks lag in NDA reign

Realty, power, infra stocks underperform benchmark indices in last eight months; experts see them making a comeback as bottlenecks reduce

Latest News
article-main
FacebookTwitterWhatsappLinkedin

The 'India growth story' stocks, which had run up before Lok Sabha elections in anticipation of a new government pushing major reforms and spending, have underperformed the benchmark indices during the eight months of the NDA government, with some even posting negative returns.

These stocks belong to sectors such as power, infrastructure and realty, which require heavy capital expenditure. Post the swearing-in on May 26, the Sensex and Nifty has moved up 19.59% and 21.13%, respectively, but the power and realty indices are down 8.27% and 0.84%, respectively.

Experts said the sentiment in the stock market has run ahead of its fundamentals.

Anticipating change in guard at the Centre, the stock market rally had begun much before the election results on May 16, 2014.

In the pre-Lok Sabha election rally, stocks like JP Associates, L&T, Tata Power, HDIL, Adani Power were huge gainers with realty and power index gaining 35.92% and 38.01%, respectively from November 1, 2013 to May 26 2014. During the same period the Sensex and the Nifty had gained 16.61% and 16.68%, respectively.

Deena Mehta, managing director, Asit C Mehta Investments and Intermediates, said, "Stock markets are about expectations and reality, and post elections results expectations have caught up with reality."

According to experts, there was a widespread expectation among the investor community that a change in regime would bring about a shift in the policy framework and improve execution capabilities of the government. This led to a spur in demand for stocks from sectors like infrastructure, power, heavy engineering and real estate stocks. Post May 26, the rally is majorly led by private banks and selected pharma stocks.

Jagannatham Thunuguntla, head of fundamental research, Karvy Stock Broking Ltd, said, "Many of the infrastructure and realty companies have high debt on their books. This led to a sense of sceptism among investors regarding these stocks, once the market started positioning itself post the elections."

The index of industrial production (IIP) growth rate has also remained subdued in the last calendar year with October registering a negative growth of 4.20%.

G Chokkalingam, managing director and founder, Equinomics Research and Advisory Pvt Ltd, said, "Before any elections the markets tend to run ahead of its fundamentals. The underlying industrial growth in the economy is stagnating."

With the RBI likely to cut key rates, the future look positive for these cash-strapped sectors as it will help in bringing down the cost of funds, experts said. The coal block e-auction in March will help remove the problem of fuel linkages and give a fillip to the India growth story, they said. The land acquisition ordinance if passed in the parliament is expected to be immensely beneficial to the real estate and infrastructure sector.

Deven Choksey, CEO and MD at K R Choksey Shares and Securities, said the Supreme Court decision on implementation of power tariff hike will lead to a positive re-rating of power stocks.

Experts also expect the government to announce an increase in capital expenditure which will help boost industrial activity in the economy.

Alex Mathews, head of research, Geojit BNP Paribas Financial Services Ltd, sees infrastructure and power sectors to be frontrunners as private bank valuations are already stressed.

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement