Stocks that gave bull market returns even as Nifty corrected

The benchmark Nifty50 and the more comprehensive Nifty500 have both corrected over 6 per cent since hitting their record highs on October 19. Investor exuberance has mellowed amid mixed September quarter earnings, US Federal Reserve’s tapering announcement and the bombing of the largest IPO in India’s history, Paytm.

Consistent withdrawal of money by foreign portfolio investors (FPIs) as well as domestic institutional investors has proven to be more than enough to douse the optimism among retail investors. On an average, a Nifty500 stock has fallen 8 per cent in the five-week period, suggesting that the underbelly of the market has seen more pain than what is being reflected by the benchmarks. “So it is a pause rather than a sellout by FIIs (foreign institutional investors) or FPIs, and they will come back because the growth in India would be one of the highest in the world in terms of GDP growth, and earnings will continue to follow. And that is where the excitement will come again for the market,” Andrew Holland, CEO at Avendus Capital Public Markets Alternate Strategies, told ETNow in a recent interview.

That said, market veterans always suggest that investors should keep an eye on stocks that are not falling during the bad times than those that are. That is because in the case of such stocks, investor conviction is the strongest based on an upbeat earnings trajectory instead of merely a rosy narrative.

While only a fifth of the Nifty500 stocks managed to deliver positive returns when the entire market was going through a corrective phase, around 14 stocks were able to deliver returns that are more fitting of a bull market.

Among them were prominent names such as Apollo Hospitals, Thermax, Minda Corporation, KPIT Technologies and Trident. The average return in the five-month period among these 14 stocks was a handsome 30 per cent.

Stocks like Minda Corporation, Thermax and Apollo Hospitals have benefitted from stellar September quarter earnings and the upgrades to their valuations that followed from analysts. However, the majority of them belonged to sectors that are benefitting either from the reopening of the economy or the green shoots appearing in the industrial part of the economy.

“The cyclicals are the ones wherein the most of the earning recovery is happening because they have come off from almost a lost decade and there the valuations are still quite cheap. I would stay with the cyclical part of it,” Santosh Kumar Singh, head of research at Motilal Oswal AMC, told ETNow.