News Analysis

4 out of 5 stocks skid in volatile 2018; small-caps both lose and gain big

Anand Kalyanaraman | Updated on December 24, 2018 Published on December 23, 2018

Year also had its share of multi-baggers, led by chemicals and finance companies

The year 2018 has been a very volatile one for the stock market.

The bellwether BSE Sensex rallied smartly until August only to give up all its gains in the downturn that followed.

Still, the index is up about 5 per cent year-to-date thanks to the recovery over the past couple of months.

Most stocks, though, have not been able to keep their heads above water. Nearly 85 per cent of the 2,413 stocks quoting on the BSE have lost value; just about one in six have gained.

Almost 1,500 stocks, or more than six in 10, have lost at least 25 per cent over the year, and more than a quarter of the stocks are down 50 per cent or more. In contrast, only 177 stocks (less than one in 12) have gained at least 25 per cent, and 87 stocks (less than one in 25) have gained 50 per cent or more.

Mid, small-cap losers

This poor show flows from the fact that the downturn in the market since February took a heavy toll on many mid- and small-cap stocks, which form the chunk of the stock universe.

The BSE mid-cap index is down about 14 per cent while the BSE small-cap index has fallen 24 per cent over the year. The sharp run-up in earlier years that resulted in inflated valuations in many mid- and small-cap stocks was seemingly reversed with a vengeance.

 

In many smaller counters, the pain was more severe than the indices indicate. Eighty-one stocks have lost 80 per cent or more of their value the past year, and except two, all these big losers are small-cap stocks. The list includes names such as Sunstar Realty, Krishna Ventures, Yamini Investments and Crescent Leasing.

Among the bigger names that have also been decimated over the past year are PC Jeweller (down 82 per cent) and Vakrangee (down 91 per cent) amidst allegations of corporate governance lapses and price manipulation.

Multi-baggers, too

But even in this overall weak market, there have been a few multi-baggers, with 34 stocks doubling or more.

On top of this list is Sadhana Nitrochem. The stock of this chemicals maker has shot up almost 10-fold last year, from ₹95 a share in end-December 2017 to ₹922 now.

Next on the list are finance companies Dolat Investments, Darjeeling Ropeway Company and Orient Tradelink, up 7-8 times since last December.

Multi-sector show

While the multi-bagger list is dominated by finance and chemical stocks, it also has a fair sprinkling of stocks from other sectors such as pharma (DIL), paper (Nath Pulp & Paper), plastics (Tijaria Polypipes) and software (GSS Infotech).

The common thread among these 34 big winners is that they are all small-cap and, in most cases, micro-cap stocks. Their average market-cap is just ₹525 crore approximately, with quite a few still in double digits despite their rally.

The surge in many multi-baggers does not seem to be backed by the companies’ financial performance — some scrips have shone despite the companies posting losses. Some, such as Orient Tradelink, have also been assigned higher risk groups such as ‘XT’ by the BSE, indicating higher attention from a regulatory monitoring standpoint.

Investors should tread with caution. Smaller stocks, in particular, seem vulnerable to the homily — the higher they go, the harder they fall.

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