Some 481 companies listed on BSE have lost half of their values so far this year.
Getty ImagesSome 31 stocks have eroded more than 90 per cent of value so far in 2019, while 157 others have erased 70 per cent of their market capitalisation.
Mumbai: As equity benchmarks Sensex and Nifty ruled near new highs, a bunch of stocks continued to reel under selling pressure, eroding more than 90 per cent of their value so far this year.
Some 31 stocks have eroded more than 90 per cent of value so far in 2019, while 157 others have erased 70 per cent of their market capitalisation.
“We haven’t seen many businesses get destroyed in quick succession. Businesses need to keep up with times and take care of leverage or they can die,” said Deven Choksey, Group Managing Director, KR Choksey Investment Managers.
Some 481 companies listed on BSE have lost half of their values so far this year.
Choksey said businesses are getting radically exposed to a fast-moving world, and as a result conventional players are getting marginalised. “They haven’t been able to cope up with destructive models. These include a host of companies,” he said.
Cox & Kings, GBL Industries, Ejecta Marketing, Talwalkars Healthclubs, Gopala Polyplast, Reliance Communications, LEEL Electricals, High Ground Enterprise, Mcleod Russel India and Ashapura Intimates Fashion have been among the top 10 wealth destructors on Dalal Street so far in 2019.
“The market is giving a premium to those companies which are moving with times, to run new generation business models. When business models fail, every other aspect, including leverage, would work against you,” he added.
Others included three Anil Ambani-led Adag firms – Reliance Capital, Reliance Infrastructure and Reliance Home Finance – besides Jet Airways, Dewan Housing Finance Corporation, Sintex Industries.
This time around, the stocks rally has been concentrated in a few top stocks, which have driven the indices to record highs, while the broader market has not only lagged, but actually moved in the other direction.
Sensex advanced 21 per cent between January 1, 2018 and November 25, 2019, while the BSE Midcap and Smallcap indices have declined 16 per cent and 30 per cent, respectively.
Nifty gained 16 per cent, while Nifty Next50 retreated 8 per cent.
Others say the divergence in the market has become more profound in recent times, and gradually it was becoming a global trend as well.
“There has been a huge divergence in our market over the past couple of years, where growth and quality stocks have got more than their fair share of institutional interest as the domestic macro environment turned challenging. So, there has been a flight to safety and preference for quality over value,” said Gaurav Dua, head of capital market strategy and investments at Sharekhan by BNP Paribas.
“Secondly, this skewness has also been a global trend, because of a large shift of money from active funds to passive funds. If you look at the recent commentaries from global investment gurus, there is a huge valuation gap between mid and smallcap segments and the largecaps in markets, including in the US,” he said.
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