The last two weeks have been one of the toughest for equity investors since the breakout of the COVID-19 pandemic in February 2020. While a sharp decline in the stock prices in February and March 2020 was painful and had dug a deep hole in investors’ portfolios, the pessimism didn’t last long. The broader market and most stock prices were back to pre-COVID levels by the middle of November 2020 and the markets were full of optimism about the possibilities ahead.
But it is all completely different right now. The broader market continues to grind down and no one knows what to expect next from the financial markets, the broader economy or the policymakers. This is creating a sense of uncertainty and fogginess on the street.
In fact, the benchmark indices such as BSE Sensex and Nifty 50 are now making lower highs since their peak in October 2021. This means that every short-term rally of the market high is used by the big institutional investors to sell rather than consolidate for a further rally.
This has made stock picking difficult for investors in the current market.
But it’s not all gloom on the doom on Dalal Street right now. While the benchmark BSE Sensex is down nearly 5 percent during the month of May so far and nearly half the BSE500 stocks are down 10 percent, quite a few stocks are showing a lot of character and have actually gone up during the period.
Here are 10 stocks which have seen a rise in their share price during May so far despite a big sell-off in the broader market. Many of these companies have strong fundamentals and have the potential to rise further. Some of them however have become quite expensive in terms of valuation that may not be to the liking of value investors.
1. Public sector gas utility Gujarat Gas is at the top of the list. The stock is up 11.5 percent during the month so far but lags behind Sensex on a 12-months basis. The stock has the potential to rally even more from current levels. The company reported high double-digit growth in revenues and profits in Q4FY22 and remains reasonably priced with a P/E multiple of 11.5X. Its price to book value ratio of 6.6X however is on the higher side for a gas utility.
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2. Multinational capital goods maker ABB is in the second spot and is up 8 percent month to date. The stock is up nearly 70 percent in the last 12 months. The rally has been fuelled by a big jump in ABB's profits in Q4FY22 and FY22. With a debt-free balance sheet and a strong product portfolio, ABB is one of the best stocks to own in the capital goods space but it's richly valued. The stock is trading at a P/E of 97X and price-to-book value of 12X - both nearly four times that of the Sensex.
3. Tata Chemicals is next and is up 5 percent month to date. The rally has been fuelled by a big jump in the company’s earnings in Q4FY22 thanks to a rise in its product prices globally. The company is one of the world's top producers of Soda Ash, a key industrial raw material that makes it a beneficiary of global inflation in commodities. The stocks also remain reasonably priced with P/E of 20X and P/B of 1.4X -- both at a discount to the Sensex valuation.
4. Public sector Power Grid Corporation is next with a 5 percent rise in its stock price since the beginning of this month.
It’s up 45 percent in the last 12 months and remains a value stock with a P/E of 12X and P/B of 2.1X. It’s also a dividend stock with a yield of 3 percent.
5. The liquefied natural gas seller, Petronet LNG, is next on our list. The stock is up 4.6 percent month to date but is down 10 percent in the last 12 months against a 10 percent rise in Sensex in the period. The stock may however do well now with a double-digit rise in the company's revenues and profits in Q4FY22. The company is also likely to gain from the rise in gas demand due to a coal shortage in the country. Besides, it remains reasonably priced with a P/E of 9.7X and a price to book value of 2.5X. It’s also a dividend stock with a yield of 5.4 percent.
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6. Chemical producer NOCIL is next. It is up 3.4 percent month to date thanks to a strong result by the company in Q4FY22. It has gained from a rise in bulk chemical prices globally which could continue to keep its margins and profits at an elevated level for at least a few quarters more. It has a debt-free balance sheet and remains one of the cheapest chemicals companies with a P/E of 27X and P/B of 2.9X.
7. The multinational capital goods maker, Siemens, is next on our list. The stock is up 2 percent month to date and has outperformed the Sensex in the last 12 months. It’s the market leader in its segment with a debt-free balance sheet that puts it in a comfortable position in the environment of rising interest rates. But it remains an expensive stock with a P/E of 79X and P/B ratio of 8X, much higher than that of the Sensex.
8. The mid-sized private sector lender, DCB Bank, is next on our list. The stock is up 1.7 percent month to date driven by a strong double-digit rise in its earnings in Q4FY22. It could rally further given an expected rise in bank margins due to a rate hike and its low valuation. The stock is trading at a P/E of 8.8X and P/B of 0.7X.
9. Kotak Mahindra Bank comes next with a 1.2 percent rise in its share price since the beginning of the month. The stock has gained from a sharp recovery in its earnings in Q4FY22 after a poor show in previous quarters.
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The stock is trading at a P/E of 29.7X and P/B of 3.7X.
10. Fertiliser maker Coromandel International is next on the list. The stock is up 1 percent since the beginning of the month and has beaten the Sensex in the last 12 months. The rally has been fuelled by a big jump in the company's revenues and profits in FY22. Analysts expect it to continue to do well, given a global shortage of fertilisers and their high prices. It also remains reasonably priced with a P/E of 17.3X and a P/B of 4.2X.
(Advice: This article is for information purpose only. Readers are advised to consult a certified financial advisor before making investment in any of the funds or securities mentioned above.)
(Karan Deo Sharma is a Mumbai-based finance and equity markets specialist).