No rain, but stock prices drown on Monday

Monday was a day of blues for the stock market with nearly every other Gujarat-based listed small and mid-cap company either touching its 52-week or even all-time low during the day. The market opened in the red to weak Asian as well as US cues.

The torrent unleashed by fears of an early rollback of stimulus along with weak economic cues culminated in the benchmark indices of Sensex and Nifty suffering. It was a terrible start to the week as the Nifty slipped another 77 points and fell below the 5,600 mark –levels last seen on April 16. The Sensex, meanwhile, fell 233 points to close at 18,540.

As an result, Gujarat-based companies such as Torrent Power, Torrent Cables, Suzlon Energy, Suraj Ltd, Rushil Décor, Elecon Engineering, GSPL, Dishman Pharma, Gujarat Gas, Ganesh Housing and many others touched their 52-week low during the day. If the motive is to invest for the long-term, experts suggest this is the right time to enter the market, provided the scrips are of high quality.

With a fall of 5.63%, Torrent Power touched its 52-week low of Rs109 per share on Monday, as against its 52-week high Rs198, six months ago. Chemical maker and exporter, Kiri Industries fell from Rs32 per share in July 2012 to Rs5.40 last week. Despite being a defensive stock from the pharmaceutical sector, Dishman Pharma closed at Rs55.50 per share, 55% lower than its year’s high. Six months ago, the scrip had hit its 52-week high of Rs124.50 in December 2012.

Sentiment is negative across the street, said MD & CEO of Dhanvarsha Fincap, Nilesh Kotak. “So many small and mid-cap companies were at such lows owing to international factors and weakness in currency. The most worrying thing is that many of them touched their all-time lows on the bourses,” he said.

At present, retail participation is almost nil, according to him.

“FIIs are currently showing interest in only large-cap or limited mid-cap companies. The small and remaining mid-cap companies are witnessing very little volume of trading,” said Kotak.

However, IIFL research head Amar Ambani is not too perturbed.

“The recent correction provides investors with an opportunity to enter into high quality private banks such as Axis Bank, HDFC Bank, Yes Bank and IndusInd Bank. These stocks also carry strong earnings growth visibility. On the other hand, public peers appear oversold and are less likely to bounce back in the near term given their weak earnings outlook,” he said.