Déjà vu: 2/3 stocks listed in 2010 are underwater

A majority of initial public offers that hit the market in 2010 have fallen below their issue prices in the New Year.

Of the 71 companies that came out with public issues in 2010, 47 are trading below their issue prices after the markets fell in January. Six companies have lost more than 70% of their value, while 17 have lost half.

Among the worst hit are Aster Silicates, which has lost 75.1%, Gyscoal Alloys, which has declined 73.1%, and Tirupati Inks, which is down 71.5%.

Experts feel the decline is in line with the fall in the broader markets.

“Stocks from the secondary market have also fallen in a comparable fashion in the time,” said Phani Sekhar, fund manager at Angel Broking.

The Sensex maybe tottering over 18000 but more than half the stocks in the broader market have already slipped far below the mark.

“Around 50% of the stocks in the BSE 500 are trading at levels lower than they were when the Sensex was at 16000,” said Chokkalingam G, executive director and chief investment officer at FCH Centrum Wealth Managers.

A year ago, on February 8 2010, the Sensex was at 15935.61. While the current benchmark level is 11% higher, many stocks are below their levels at the time.
As many as 226 out of 480 companies in the BSE 500 are trading at a discount to their share-price on February 5 2010, when the Sensex was last at 16000.

Thirteen companies have lost more than 50% of their market capitalisation since then, 35 are over 40%.

The number of companies that have lost a quarter of their value stands at 98.
Among the worst hit are JMD Telefilms, which is down 88.8% from Rs134.45 in 2010 to `15 as of Friday.

Shree Ashtavinayak Cine Energy, Lakshmi Energy and Foods and Kiri Dyes and Chemicals have lost 58-75% each.

“Many stocks in the broader markets are at 13000-14000 level valuations. One should avoid sectors with a lot of leverage, but there is a lot of value that can be picked up for the longer term,” said Phani Sekhar.

“Investors could look at companies with the least leverage since we are going into a higher interest rate environment. Valuationwise, companies in the banking and pharma sectors look attractive,” said Chokkalingam G.

On Friday, the Sensex closed at 18008.15 after losing 2500.94 points since the beginning of the New Year.

Barring further selling by institutions, analysts see little room for downside on valuations.

Foreign institutional investors have been net sellers by Rs6,140 crore since the beginning of the year.