Mid-cap stocks butchered while Nifty soars to new heights
One aspect about the present market which is very bizarre is the sharp dichotomy between the performance of the Indices versus the performance of the Mid-cap and Small-cap stocks.
While the Nifty and Sensex are looking strong, mid-cap and small-cap stocks are crumbling to pieces.
In fact, while the Nifty has soared 1.4% in 2019, the Mid-cap index has lost 6.5%.
The Small-cap Index has fared even worse with a loss of 7.3%.
Even within the Indices, there is sharp dichotomy.
Only a few front line stocks like Reliance, Infy and TCS are calling the shots.
About 40% of the Nifty stocks are down 5-20% since the beginning of the year.
It is notable that even the Nifty and Sensex are under-performing in comparison to their peers in foreign countries.
The Dow has soared 8.9% while the Nasdaq has surged 11.5%.
The entire MSCI Emerging Markets Index is up 9%.
Brazil, which is India’s arch rival when it comes to attracting foreign investors, is up a whopping 29% in 2019.
#Nifty at 11000 again, but…
40% of #Nifty50 stocks down 5-20% since start of 2019
SO FAR THIS YEAR
Nifty: 1.4%
Bank Nifty: 0.8%
Nifty Junior: -5.9%
Midcap Index: -6.5%
Smallcap Index: -7.3%
MEANWHILE#Dow: 8.9%#Nasdaq: 11.5%
MSCI EM: 9%
Brazil: UP 29% !!#stocks #stockmarket— Surabhi Upadhyay (@SurabhiUpadhyay) February 6, 2019
It is notable that the situation was the reverse in December 2018 and the Indian indices were outperforming their foreign counterparts.
US Dow jones crashes 1700 points in a week while India Sensex rises 1500 points during the same period ??. Enjoy the rally @AbakkusInvest @EconomicTimes @CNBCTV18News
— Sunil Singhania (@SunilBSinghania) December 21, 2018
Funds are gushing back into India
It cannot be disputed that Sunil Singhania has a deep understanding of global macro-economic issues and how they affect the flow of funds into emerging markets like India.
He pointed out that the fallout of the strength in the US economy and US Dollar is that the interest rates are weakening.
The 10-year yield in the U.S. has already slumped from 3.25 to 2.6 percent and it is unlikely to surge in the foreseeable future.
The consequence is that foreign funds looking for higher yields will have no option but to come to emerging markets including India.
“We are already seeing that leading to flows returning to emerging markets. In the last six weeks’ data, flows in emerging markets from the U.S., both in terms of bond flows and equity flows are very strong,” Sunil Singhania pointed out.
He emphasized that nearly $2-2.5 billion of foreign investments in equity have gushed into Dalal Street in just the past 10-15 days.
US 10-year yields fall below 3%!
One more concern behind. With US$ also now at the margin weakening, huge flows into risk assets including emerging markets and India can be expected.
— Sunil Singhania (@SunilBSinghania) November 29, 2018
FOLLOWING THE #MONEY
FPI Flows In Feb
Feb 1 – 2891 cr
Feb 4 – 1208 cr
Feb 5 – 176 cr
Feb 6 – 419cr
Feb 7 – 730 cr
Source: NSDLFPI FLOWS: +ve in 2019
Jan: -4262cr
Feb: 4875crYET UNDERPERFORMANCE#Nifty: +2%
MSCI EM: +8%
MSCI Asia Ex Jap: +7.7%#Dow: +7.9%#StockMarket— Surabhi Upadhyay (@SurabhiUpadhyay) February 8, 2019
Twenty percent of human beings born in world after Jan. 1, 2000 are Indians
Sunil Singhania made the astonishing revelation that almost 20% of all human beings born in the World born after 1st January 2000 are Indians.
The best part is that these youngsters have not yet reached the consumption stage.
It is explicit that once these youngsters mature and start consuming, there will be insatiable demand for products which will send the cash registers of suppliers ringing.
“Consumption is a structural story. We have a young population and they have still not entered the consumption age. Consumption is a long-term trend in India,” he opined.
(Sunil Singhania with team members of Abakkus Asset Manager LLP)
Had mentioned on May 19, 2018 to get wallets ready for big opportunity coming in 2-4 months. Exactly in two months we have this “stocks on sale” opp. Build positions over next two months for super returns. BE POSITIVE! https://t.co/nYFRJdxDbH
— Sunil Singhania (@SunilBSinghania) June 28, 2018
Best consumption stocks to buy now
Sunil Singhania has already recommended that we buy Bombay Burmah Trading Corp alias BBTC on the basis that it is the holding company of Britannia and Bombay Dyeing, two of the greatest consumption stocks.
BBTC is quoting at a steep discount to its intrinsic value which means that we will also enjoy margin of safety in the stock.
BBTC (M-cap 2925 cr)
Holds 50.75% stake (direct + indirect) in Britannia valued at 18000 cr
Also owns 14.35% stake in Bombay Dyeing— Varinder Bansal (@varinder_bansal) August 8, 2016
BOMBAY BURMAH Mcap 6391cr
Holds 50.7% in BRITANNIA valued at Rs.25151cr
Stake in Britannia at 75% disc = MCap of Bombay burmah@CNBCTV18Live— Nigel D'Souza (@Nigel__DSouza) August 7, 2017
BRITANNIA at 6070
Stock Hits Yet Another Record High
MCAP at 73000 Cr
Also Watch for Bombay Burmah: Holds 50.7% Stake in Co
Bombay Burmah MCap at 10850 Cr
BBTC Holdings in Britannia worth 37000 Cr#FMCGisLife@CNBCTV18Live@BritanniaIndLtd https://t.co/fLRzk3hLcY— Mangalam Maloo (@blitzkreigm) June 13, 2018
Some other consumption stocks which are evergreen buys include blue-chip powerhouses like Asian Paints, Kajaria Ceramics, Cera Sanitaryware, Dabur, Pidilite etc.
CONSUMPTION, CONSUMPTION, CONSUMPTION!
JUBLFOOD: SSSg 14.6%
DABUR: Volume Growth 12.4%
KANSAI NEROLAC: 15% Volume Growth
PIDILITE: 11% Volume Growth
Weak Ones:
EMAMI: +3.5% Volume Growth
GCPL: +1% Volume Growth#FMCGisLife https://t.co/HwFagmJIkm— Mangalam Maloo (@blitzkreigm) January 31, 2019
Biggest opportunity is in the commercial vehicle segment
Sunil Singhania advised us to forget about two-wheeler and four-wheeler stocks.
“Two-wheelers are well penetrated. So, from here on, to expect significant volume increase year by year is tough,” he said.
He also explained that while the business is decent and with good cash flows, the valuations are quite high at 15-16 PE and the scope for multibagger gains is dim.
As regards four-wheelers, Sunil Singhania pointed out that there are headwinds in terms of cost pressure and demand, which is creating pressure.
However, he came out with all guns blazing in favour of commercial vehicle stocks.
“The biggest opportunity in the commercial vehicle segment is that there is a view that sales have slowed down.
My view is if you are bullish on infrastructure growth, economic growth then this segment cannot be ignored,” he said emphatically.
As regards the best CV stock to buy, we can look at Jamna Auto Industries Limited.
Jamna Auto has been described by SMIFS as the “Undisputed leader of the Indian automotive suspension space” and is recommended as a ‘strong buy‘ for gains in excess of 80%.
We can also look at JBM Auto which is recommended by HDFC Sec on the logic that it is quoting at “tempting valuations” and has an upside potential of 90%.
Sandhar Technologies and Suprajit Engineering also qualify because they are powerhouses with proven track records for rewarding shareholders with multibagger gains.
Tech stocks are must buys
Tech stocks like Infosys and TCS are presently flying high on the back of robust Q3FY19 results.
Sunil Singhania opined that there is more money to be made from these stocks.
He explained that because IT is a completely export-oriented sector, the growth of 4% in the US economy augers very well for these stocks.
He also pointed out that Technology has become the way of life and there is and will be insatiable demand for technology services.
The spate of buybacks and hefty dividend payouts is also a positive sign because it improves the return-on-equity, Sunil Singhania opined.
“The cash conversion and distribution will ensure that decent returns can be made in this sector,” he added.
I am sticking with Quality consumption like FMCG,paints,consumers dicretionary and durables ,pvt banks ,hdfc in nbfc,,pvt insurance,mutual fund amc,diversified like RIL,infra like L& T and Big boys of IT.My portfolio remains evergreen as always except that in 2018 I had profitable partial exit in yes bank and complete exit from DHFL on first sign of problem and complete exit in Rel Capital when it was around 700 during boom periods . In my view Indian market has matured and it is time to go with proven compoundedrs of growing sector leaders .Third class stocks has always been a Trap,where 95% of investors lost money and this % has now increased with third grade sticks starting consuming even so called big and smart investors and there followers to explain them that they need to learn more.
Jamna is a screaming buy… so as gabriel and suprajit
I am really surprised that lot of PMS guys (Pabrai, Porinju, Basant, Bakshi etc..) whose primary living based on performance in the equity market of clients money lost big time. If these highly educated & experienced, specialized in equity field, working full time tracking the markets and authors of books/articles/blogs could lose so much capital, what is the chance of an ordinary investor.
You have rating agencies with qualified professionals and whose primary job is to give rating after due diligence is not able to spot on IL&FS, ESSEL etc., I shudder to think what will happen to normal small investor.
For regular office goers, fulfill tax savings, go with PPF, home loan and bit of FDs that he/she understands. No need to go for equity beyond PE 20 levels.
Watever happ to sanjay bakshi pms..no news,has he left investing