Stocks That Are Defying The Rout In Indian Markets
Even as Indian equity markets have declined the most in 17 months, select stocks have held their own.
Volatility gripped Indian equities following the spread of the novel coronavirus outside China and the Reserve Bank of India taking over Yes Bank Ltd. and capping withdrawals.
Markets tumbled after Russia baulked at Saudi Arabia-led Organisation of Petroleum Exporting Countries’ demand for deeper output cuts to cope with falling demand due to the virus, triggering a price war and crude’s biggest fall since 1991. The volatility led to a 15 percent decline in Nifty 50 since its Jan. 20 peak.
IPCA Laboratories Ltd., AU Small Finance Bank Ltd., Ajanta Pharma Ltd., Deepak Nitrite Ltd., Strides Pharma Science Ltd. and IndiaMart Intermesh Ltd. are among the mid- and small-sized companies that rose defying the rout. In all, 15 constituents of Nifty Midcap 100 gained, while 14 members of the Nifty Smallcap 100 rose.
Here’s a snapshot of the stocks that bucked the trend:
Reasons Behind Outperformance
Consumer Goods Makers
Consumer goods makers benefitted from the fall in global crude oil prices as their packaging—which are made up of derivatives of oil—comprise nearly 17 percent of their costs, according to Bank of America Global Research. A fall in these costs imparts room for promotion-driven volume push across segments, and fall in crude oil-related cost savings for Indian consumers could revive consumer-related spends, it said in a note.
Lower crude oil prices are expected to provide a tailwind for Asian Paints as crude oil derivatives comprise nearly 60 percent of its input costs.
Shares of the telecom tower operator rose on the back of a possible relief from the government on adjusted gross revenue dues.
Expected strong earnings growth on the back of outperformance in domestic formulations, improved prospects in API segment and revival in international generics.
AU Small Finance
Strong management execution on the back of industry-leading growth of assets under management and robust asset quality amid micro headwinds and higher margins and fee income coupled with relatively lower credit cost.
Healthy momentum in U.S. market sales, renewed focus on dermatological portfolio, domestic industry outperformance in cardiology/pain and favourable macro scenario for branded Africa/Asia segments aided the stock.
Capacity shutdown in China due to outbreak of coronavirus is expected to aid the chemical maker’s earnings in the ongoing quarter.
Increased launches, better traction in existing products in U.S. generics and ramp-up in other regulated markets is expected to aid earnings.
Strong earnings despite weak economic environment, better cost optimisation and higher margins aided performance.
(Reasons have been compiled from notes of brokerages like BofA Securities, Jefferies, Antique Stock Broking, Motilal Oswal, IIFL, Prabhudas Lilladher, among others.)