Nifty50 constituents saw wild swings in a weak year for equities globally. As many as 20 index stocks, led by tier I IT biggies, lost a combined market capitalisation (m-cap) of Rs 10 lakh crore in 2022. Analysts said valuations on some of these counters look attractive post the weakness.
Laggards
IT majors namely Tata Consultancy Services (TCS), Wipro, Infosys, HCL Technologies and Tech Mahindra witnessed heavy correction, as their combined market capitalisation go eroded by Rs 7 lakh crore year-to-date (YTD). Shares of these IT biggies plunged between 13 per cent and 47 per cent on a YTD basis. The Nifty IT index plunged 10,464 points, or 27 per cent, to 28,237.05 during the same period.
“The IT sector valuation multiples are now reasonable in comparison to long-term averages. We do believe that the slowdown in the US and Europe would be a boon for Indian IT companies, as they would utilise this slowdown to gain market share. We like engineering research and design as a theme and also like product companies that have demonstrated the capability of innovating and gaining market share,” said Aditya Sood, Fund Manager at InCred Multicap Portfolio.
Narendra Solanki, Head-Equity Research, Anand Rathi Shares & Stock Brokers said, “We have a positive outlook on Infosys. It is our preferred pick in the IT space, as growth remains broad-based and deal momentum robust, with digital transformation rapidly scaling across verticals and regions, strong cash generation and healthy payout. We have a ‘Buy’ rating on Infosys with a target of Rs 1,800.” Shares of the company closed at Rs 1,497 on December 23.
The combined m-cap of other Nifty constituents such as Bajaj Finance, Tata Motors, Divi's Laboratories, Asian Paints, Bajaj Finserv, Ultratech Cement, Bharat Petroleum Corporation, Tata Steel, Hindalco Industries, HDFC Life Insurance Co, Dr Reddy's Laboratories, Apollo Hospitals Enterprise, UPL, Titan Company and Oil & Natural Gas Corporation have fallen by around Rs 2.50 lakh crore in the ongoing calendar year.
Shares of Divi’s Labs and Tata Motors have declined 25 per cent and 22 per cent, respectively, on a YTD basis. OMC BPCL, insurance major HDFC Life and drug maker Dr Reddy’s Labs also lost over 10 per cent during the same period.
In comparison, Nifty advanced 2.61 per cent to 17,806.80 on December 23 from 17,354.05 on December 31, last year.
The looming uncertainty around domestic and global inflation, elevated global interest rates and concerns around the widely perceived steep valuation of Indian equities kept the market volatile in 2022. There are expectations that macroeconomic data from the US and Covid news will drive markets in the near term.
From an investment perspective, Nirav Karkera, Head of Research at Fisdom expects banking as a sector to lead broader equities to higher levels in 2023. “With fundamentals of improving loan book health, revival of public and private capex, uptick in demand for credit, efficiency and scale through rapid digitisation along with headroom for improved earnings present strong opportunities for banking stocks,” he said.
Leaders
With a rally of 113 per cent, Adani Enterprises stood as the top gainer in the index. Shares of the company jumped to Rs 3,642.20 on December 23 from Rs 1,709.45 on December 31 last year. As a result, the market capitalistaion of the company climbed over Rs 2 lakh crore to Rs 4.15 lakh crore. A rise in other stocks such as Eicher Motors (up 20 per cent), Britannia Industries (up 20 per cent), State Bank of India (up 25 per cent), IndusInd Bank (up 29 per cent), NTPC (up 31 per cent), Axis Bank (up 33 per cent), Mahindra & Mahindra (46 per cent), Coal India (47 per cent) and ITC (up 50 per cent) capped the m-cap downside for Nifty50.
YES Securities is positive on the Indian equity market. Heavyweights like Reliance Industries, banks and IT services look attractive to the broking firm.
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