40% of stocks hit 52-week lows in 2 days

Two-fifths of all listed stocks dropped to their lowest price in a year over the last two days as domestic concerns added to fears over the euro zone mess.

As many as 384 stocks hit 52-week lows on Tuesday.
For the record, of the 2,901 listed securities, 1,172 have hit 52-week lows this week, according to an analysis by DNA.

The analysis excluded stocks with zero volume over the last couple of sessions.

Ten out of the 30 stocks that make up the Sensex also hit their 52-week lows this week, falling 34-56% from highs. Sterlite industries recorded the highest decline, at 56%. Jaiprakash Associates, Larsen and Toubro, Tata Steel and Bhel have all fallen in excess of 50%.

Additionally, nine out of the 13 sectoral indices hit 52-week lows over the last two days.

Ambareesh Baliga, chief operating officer at Way2Wealth Brokers, blames it on domestic pressures. “Till six months back, our economy was in a position to withstand global shocks and stand out, but somehow, intentionally or otherwise, due to government’s limbo, we are now in a precarious situation where nothing is in our favour. Inflation continues to be high, currency has seen a huge fall and the economy is headed downwards to sub-7% levels,” he said.

Inflation for October came in at 9.11%, indicating prices have risen almost 10% year on year.

The rupee has fallen 20.01% from a high of 44.07 to the dollar this year, closing Tuesday at 52.89.

A weaker rupee adds to the losses of foreign institutional investors.

Foreign institutional investors have been net sellers by Rs3,114.2 crore since the beginning of the calendar, after being net buyers by Rs1.36 lakh crore last year.

This correction still does not necessarily make Indian equities a screaming buy, said K Ramanathan, chief investment officer, ING Investment Management India.

“While on the face of it the market may look reasonable… valuations will inch up as further downward revision in earnings takes place. Overall, we believe the valuations are reasonable and not cheap, given the challenging outlook,” he said.

Estimates for the total earnings per share of the 30 stocks that make up the BSE Sensex, an index whose movements are said to be representative of the overall market, have seen downward revisions in recent times.

The Sensex is trading at around 13 times estimated earnings for this fiscal compared with historical multiples of around 15 times the earnings. A further downward revision in earnings estimates would make the index look more expensive than it is now, even if there is no change in the absolute levels.    

Risk aversion is high, said Jitendra Panda, head of sales-broking at Future Capital Securities. “There is no visibility this time around as government itself is not acting and there’s no policy action happening. Further, there’s huge uncertainty on rupee depreciation, which is putting pressure on corporates’ earnings forecast. All these factors have put new investments and expansion plans on hold,” he said.

The Sensex closed at 15175.08 on Tuesday, a 28-month low. It has fallen 26.01% since January.