But the bigger takeaway was in the number of stocks that outdid the Nifty during the lockdown period. Even as the economy remained suspended, there were five broad themes playing out in the market.
Five themes that outdid the Nifty
If you just focus on the Nifty stocks, private banks and PSU banks may not have done too well and the IT stocks may have been largely tepid. Here are five themes that played out successfully in the midst of the lockdown.
• Revival in China
• Oil led revival in demand
• Rural demand beneficiaries
• Digital plays
• COVID related stocks
|Stock||CMP on Mar 24||CMP on 10 Jun||Absolute Returns (%)|
|Mahindra & Mahindra||245.40||472.05||92.36%|
|Larsen & Toubro||661.00||946.55||43.20%|
|NSE – NIFTY||7801||10116||29.68%|
Let us look at how these winning stocks have leveraged the various themes along the way. We have restricted to Nifty stocks only.
Revival in China
The post COVID-19 stimulus is expected to be $500 billion in China. This is likely to be backed up by fiscal measures announced by the government including easy access to bank funding. In anticipation of a revival in Chinese industrial demand, metal prices on the London Metals Exchange (LME) have also rallied since March. This has benefited stocks like Vedanta and Hindalco, which have beaten the Nifty since the lockdown began. Apart from the Chinese demand revival, Vedanta also had the added attraction of a possible delisting.
Oil led revival in demand
Oil prices touched a low of $16/bbl in the Brent market in late April and bounced nearly 150% from that level. That has revived interest in stocks like ONGC and Reliance, which are direct beneficiaries of higher oil prices. Another beneficiary has been L&T, which derives nearly a fifth of its orders from the hydrocarbon sector. ITC has also been an indirect beneficiary of the demand revival story, led by oil. These stocks have beaten the Nifty sharply since the lockdown began.
Rural demand beneficiaries
There are some factors that have silently worked in favour of the rural sector in the last few months, despite the huge pressure imposed by the lockdown. Firstly, the robust Rabi cropping season last year has boosted farm incomes in a big way. Secondly, the impact of the pandemic was less pronounced in rural areas. Thirdly, in the Q4 GDP numbers, the agricultural growth has bounced back sharply to 4% and was the only redeeming feature in an otherwise bleak year. This has boosted the fortune of stocks like Hero Motocorp, UPL, Mahindra & Mahindra as well as ITC. All these are direct beneficiaries of the rural story and have done extremely during the lockdown.
Digital plays have really delivered
It is hard to imagine Reliance Industries delivering 81% returns in 76 days, but that is a fact. Reliance Jio now has a valuation of $65 billion and has been driving RIL’s growth. Its unique digital positioning has ensured global PE fund fallen over each other to pick up a 21% stake for close to Rs.1 trillion. That has rubbed off on other digital plays too. Bharti has engineered a classic turnaround to become the fifth most valuable company in India. Even IndusInd has more than doubled in 76 days as its huge exposure to telecom has become a virtue rather than a vice.
COVID related stocks
Every crisis presents an opportunity and this time it was pharma that gained in a big way. With Gilead licensing its Remdesivir manufacturing rights to Cipla and Jubilant Life, both stocks gained sharply during the lockdown. Sun Pharma was also among the top gainers. Apart from a rapidly growing Indian market, the access to global markets is now going to be a lot simpler for pharma companies as the issue of price comes back to the fore. Above all, the COVID-19 has also resulted in FDA becoming less stringent with Indian pharma companies. It is hardly surprising that these stocks were among the stars of the lockdown.
The above five themes have played out extremely well during the lockdown. They could also be the best poised as Unlock 1.0 sets in.