Best and worst large cap stocks on Dalal Street

28 Jan 2024 , 07:01 AM

A ROBUST YEAR FOR EQUITIES COMES TO AN END

The Nifty and the Sensex have had a stellar journey in the year 2023 with most of the gains coming in the last one year. What were the best performing large cap stocks in India? Broadly, there are 4 ways to evaluate index stocks. First is to look at short term returns like a month, which captures the momentum. The next is to capture longer period of returns over 1 year. That captures the fundamentally strong plays. Thirdly, we capture the stock with the best resilience, which are the stocks measured by the extent of bounce from the lows of the month. Finally, we also look at the swing stocks, wherein the stocks are the closest to the yearly highs. Our focus would largely be on the leaders in each of these 4 categories, with just a passing reference to the laggards in the index.

Momentum Story of Nifty – Best on short term returns

Let us start with the momentum story of the Nifty using the 1-month returns as the proxy. For the Nifty index as a whole, monthly returns were almost flat at 0.49%. Out of the 50 stocks in the Nifty 50 index, 30 stocks gave positive returns and 20 gave negative returns in the last one month. The 1-month return column is shaded.

Stock  Symbol	Market Price	1-Month Return	1-Year Return	52-week High	52-week Low	Bounce from Low	Distance to High
BHARTIARTL	1,178	20.25%	53.41%	1,201	736	60.10%	1.92%
TATACONSUM	1,151	16.74%	56.43%	1,191	687	67.57%	3.51%
ONGC	235	14.91%	54.03%	246	140	67.77%	4.51%
CIPLA	1,378	14.71%	33.44%	1,425	852	61.75%	3.40%
BAJAJ-AUTO	7,487	13.19%	95.66%	7,500	3,611	107.30%	0.18%
HEROMOTOCO	4,419	12.65%	59.95%	4,560	2,246	96.76%	3.18%
APOLLOHOSP	6,129	12.13%	44.33%	6,429	4,123	48.66%	4.88%
TATAMOTORS	808	11.89%	92.09%	828	400	101.69%	2.47%
SUNPHARMA	1,360	11.13%	32.80%	1,395	922	47.43%	2.55%
TECHM	1,328	10.41%	31.51%	1,416	981	35.37%	6.65%

Data Source: NSE

What are the sectors that are showing momentum over the last one month. The momentum clearly appears to be in favour of the auto stocks and the healthcare stocks. In fact, out of the top 10 stocks by 1-month returns, 3 are healthcare stocks and 3 are auto stocks. Tata Consumer is a rare FMCG company to find itself among the gainers, because most of the FMCG companies have been the bottom bracket of performance based on 1 month returns, largely due to concerns over rural demand and profit margins. The star of the last one month was Bharti Airtel, which led with 20.25% returns in last 1 month.

What is the story of the laggards in the Nifty on one-month returns? A number of consumer companies like Asian Paints and Hindustan Unilever found themselves at the bottom. Many of the private banks and the NBFCs took a hit on one-month returns as the NII growth and the NIMs came under pressure. The worst performer in terms of one-year returns was, of course, HDFC Bank. The stock had cracked sharply after the Q3FY24 results due to NIMs falling to 3.4% and the loan growth trailing deposit growth.

Fundamental Story of Nifty – Best on longer term returns

The momentum story above captures the short term moves, but to get a fundamental story, we need to look at a slightly longer perspective of 1 year returns. For the Nifty index as a whole, annual returns were almost flat at 18.41%. Out of the 50 stocks in the Nifty 50 index, 44 stocks gave positive returns and only 6 stocks gave negative returns in the last one year period. The 1-year return column is shaded.

Stock  Symbol	Market Price	1-Month Return	1-Year Return	52-week High	52-week Low	Bounce from Low	Distance to High
BAJAJ-AUTO	7,487	13.19%	95.66%	7,500	3,611	107.30%	0.18%
TATAMOTORS	808	11.89%	92.09%	828	400	101.69%	2.47%
NTPC	314	2.00%	86.00%	326	163	92.99%	3.81%
COALINDIA	388	5.33%	68.10%	405	208	87.11%	4.21%
LT	3,606	3.20%	62.59%	3,670	2,073	73.99%	1.77%
HEROMOTOCO	4,419	12.65%	59.95%	4,560	2,246	96.76%	3.18%
TITAN	3,743	3.87%	58.93%	3,862	2,270	64.90%	3.18%
TATACONSUM	1,151	16.74%	56.43%	1,191	687	67.57%	3.51%
ONGC	235	14.91%	54.03%	246	140	67.77%	4.51%
BHARTIARTL	1,178	20.25%	53.41%	1,201	736	60.10%	1.92%

Data Source: NSE

What are the sectors that are showing momentum over the last one month? The momentum is once again with the auto stocks with Bajaj Auto, Hero Motocorp, and Tata Motors in the top 10 annual returns list. The other sector that saw a good representation was the PSU space. Among the PSUs, NTPC, Coal India and ONGC found a space in the top 10 by annual returns. Interestingly, while FMCG has overall struggled in terms of annual and monthly performance, there are two tata related FMCG stocks in this list viz. Titan and Tata Consumer Products. Interestingly, in terms of 1 year returns, there are 3 Tata group companies in the top -10 list. The star of the last one month was Bajaj Auto, which led with 95.66% returns in last 1 year. Based on annual returns, there were 10 out of the Nifty-50 stocks that generated more than 50% returns, while 26 out of the 50 index companies actually outperformed the Nifty 50 index.

What is the story of the laggards in the Nifty on one-month returns? These are largely stock specific stories that you find here, which makes the 1-year list more reliable in terms of bottom-up stories. UPL was the worst performer for the year due to a downturn in the chemicals business globally and specific management related problems at the group. Adani Enterprises has been a top gainer from the lows, but the fall since Hindenburg was so sharp that it still ended with losses for the full year. Hindustan Unilever was a laggard due to tepid performance and the pressure on the FMCG stocks. HDFC Bank also featured at the bottom, but the entire 1-year losses happened only in the last 1 month.

Resilience Story of Nifty – Best on bounce from 52-week Lows

Having seen returns in terms of momentum and fundamentals, let us turn to the Nifty for resilience stocks. These are the stock that have bounced the most from their 52-week lows and shown the maximum resilience in performance. For the Nifty index as a whole, the bounce from the low of the year was a full 26.59%. Out of the 50 stocks in the Nifty 50 index, 4 stocks bounced more than 100% from the lows, while 18 stocks bounced more than 50% from the lows and a total of 38 stocks showed more resilience than the Nifty index. The resilience in terms of bounce from the 52-week lows is indicated by the shaded column.

Stock  Symbol	Market Price	1-Month Return	1-Year Return	52-week High	52-week Low	Bounce from Low	Distance to High
ADANIPORTS	1,117	9.06%	47.21%	1,230	395	182.71%	10.11%
ADANIENT	2,819	3.39%	-15.65%	3,508	1,017	177.02%	24.46%
BAJAJ-AUTO	7,487	13.19%	95.66%	7,500	3,611	107.30%	0.18%
TATAMOTORS	808	11.89%	92.09%	828	400	101.69%	2.47%
HEROMOTOCO	4,419	12.65%	59.95%	4,560	2,246	96.76%	3.18%
NTPC	314	2.00%	86.00%	326	163	92.99%	3.81%
COALINDIA	388	5.33%	68.10%	405	208	87.11%	4.21%
LT	3,606	3.20%	62.59%	3,670	2,073	73.99%	1.77%
ONGC	235	14.91%	54.03%	246	140	67.77%	4.51%
TATACONSUM	1,151	16.74%	56.43%	1,191	687	67.57%	3.51%

Data Source: NSE

What are the sectors that are showing resilience from the 52-week lows. It is once again the auto stocks that have dominated. If you look at the most resilience stocks in the Nifty, 3 of these stocks viz., Bajaj Auto, Tata Motors and Hero Motocorp almost doubled from the lows. The two stocks at the top in terms of resilience were the Adani group stocks, viz., Adani Ports and Adani Enterprise. Both these stocks had been  battered in the aftermath of the Hindenburg report and the allegations made about the group. However, post the GQG investment, the Adani stocks showed the highest level of resilience. In terms of resilience, the 3 PSU stocks; ONGC, NTPC and Coal India were also among the top stocks to bounce from the lows, showing that PSUs had shown a fundamental shift and a smart level of resilience for the year.

What is the story of the laggards in the Nifty in terms of the lowest bounce from the 52-week lows? There were 5 stocks that have bounced less than 10% from the lows of the year. That means, they are still very close to their lows and that is a sign of weakness at a time when the Nifty and the Sensex have been hitting news lifetime highs. Among the laggards, UPL is a standard suspect due to its industry level problems and the company specific problems. In the consume goods space, Asian Paints and Hindustan Unilever, closed the year very close to their lows due to weak rural demand and pressure on margins amidst rising crude prices. Two banks were also among the stock with the lowest resilience viz. Kotak Bank and HDFC Bank; with both struggling through problems of tepid margins and rich valuations.

Swing Story of Nifty – Best on proximity to 52-week High

Let us finally look at the top ranked swing stocks for the year, wherein we use the proximity to the 52-week high as the proxy. The closer the stock is to the 52-week high, the higher is the swing factor. In fact, the Nifty index itself is just about 3.86% short of the 52-week high, which is the level it had just touched towards the end of December 2023. Out of the 50 stocks in the Nifty 50 index, 19 stocks are less than 5% away from their 52-week highs, while a total of 31 stocks are less than 10% away from their 52-week high levels. The column for proximity to the 52-week high (a proxy for the swing factor) has been shaded.

Stock  Symbol	Market Price	1-Month Return	1-Year Return	52-week High	52-week Low	Bounce from Low	Distance to High
BAJAJ-AUTO	7,487	13.19%	95.66%	7,500	3,611	107.30%	0.18%
INFY	1,673	7.20%	7.96%	1,680	1,185	41.17%	0.40%
POWERGRID	246	6.24%	11.43%	248	158	56.18%	0.75%
DRREDDY	5,911	4.88%	38.78%	5,990	4,175	41.58%	1.33%
BPCL	481	6.83%	36.74%	489	314	53.27%	1.49%
LT	3,606	3.20%	62.59%	3,670	2,073	73.99%	1.77%
BHARTIARTL	1,178	20.25%	53.41%	1,201	736	60.10%	1.92%
TATAMOTORS	808	11.89%	92.09%	828	400	101.69%	2.47%
SUNPHARMA	1,360	11.13%	32.80%	1,395	922	47.43%	2.55%
TITAN	3,743	3.87%	58.93%	3,862	2,270	64.90%	3.18%

Data Source: NSE

What are the sectors that are showing the best swing in terms of proximity to their 52-week highs. Auto companies and PSU companies continue to be the stocks with the best swing factor and are the closes to the 52-week highs. Infosys is an interesting addition to this list and most of the positive swing factor in Infosys has come after the Q3 results. During the year, value buying in tough times also helped. In terms of proximity to the peak, Bajaj Auto is the closest to its high followed by Infosys and Powergrid.

What is the story of the laggards in the Nifty in terms of proximity to the 52-week highs. The story, once again, reads like a very familiar script. At the bottom of the heap, you have stocks like UPL, Adani Enterprises, HDFC Bank, Kotak Bank and Asian Paints. Ironically, Adani Enterprises, despite showing the highest resilience, has been a low swing factor due to its distance from the highs of the month. There were 9 laggards which are falling short of the 52-week high by more than 15%. That is the set that has the problem in swing.

How to assess conviction of outperformance in Nifty?

One way to check the conviction of outperformance, is to look at the stock that have outperformed on multiple parameters. Here are looking at momentum in term of 1-month returns, fundamentals in terms of 1-year returns, resilience in terms of bounce from lows and swing in terms of proximity to the highs. Here are the quick findings.

• There are two stocks which are in the top 10 on all the four parameters above viz., Bajaj Auto and Tata Motors. They are ranking on top in terms of momentum, fundamentals, resilience, and swing factor. That have been the high conviction outperformers.
• Bharti Airtel and Larsen & Toubro have been visible in the top-10 in terms of three out of the four parameters. That is again a relatively high conviction show of strength. These could turn out to be the safe bets for investors.
• Finally, there are stocks like HDFC Bank, UPL and Hindustan Unilever which are found at the bottom of all these four parameters. That is clearly where the underperformance has come from.

Looking at a multi-dimensional view of performance provides us a much sharper view of the best and worst performers.