Investors saw a record drop in stock prices, many stocks hit circuit filters while the benchmark indices climbed new highs amid a gloomy pandemic strike and then a gush of liquidity.
During the roller-coaster ride, the equity market saw many stocks hit rock bottom at new 52-week low prices, while some latter scaled new highs and turned multibaggers in the process.
Over 70 per cent of the BSE500 stocks doubled investor wealth from their 52-week lows. Then, some of them corrected significantly after hitting new 52-week highs, while many others grounded to 52-week lows in the March selloff.
Tanla Platforms and Alok Industries emerged chart toppers in terms of stock price performance, having delivered 2,282 per cent and 2,225 per cent returns, respectively, from their 52-week highs. They are now down 25 per cent and 65 per cent from their 52-week highs.
This would mean an investment of Rs 10,000 in these stocks at their 52-week low prices would have made you Rs 2.3 lakh at their 52-week high prices.
“During the March selloff, many stocks were unreasonably punished and they fell beyond their fundamentals,” said G Chokkaligam, Founder, Equinomics Research and Advisory.
Likhita Chepa, Senior Research Analyst at CapitalVia Global Research, said the markets were in a bull run even before the pandemic strike.
“The market crashed and almost halved purely because of fear. This provided entry to many investors at very attractive valuations,” she said.
Adani Green Energy, Aarti Drugs, IndusInd Bank, IOL Chemicals & Pharmaceuticals, Laurus Labs, Birlasoft, Tata Communications, Hathway Cable & Datacom, Suven Pharma, IFB Industries and Jindal Stainless (Hisar) are some of the names that surged between 400 and 1,000 per cent from their respective 52-week lows during the year.
Many novice and gullible investors bought poor quality stocks mainly because of cheaper prices. “If you make a mistake on valuations, you still have room for recovery. But if you make a mistake on the quality of balance sheets and management, your wealth can be destroyed permanently,” he said.
Adani Gas, Dixon Technologies, Lemon Tree Hotels, Vodafone India, Dishman Carbogen Amcis, Jindal Steel and Power, Vaibhav Global, Firstsource Solutions, Affle (India), Varroc Engineering ,Advanced Enzyme Technologies, Alkyl Amines Chemicals, and Adani Enterprises were among the stocks that delivered over 300 per cent returns for this period.
The benchmark indices have surged up to 80 per cent from their March lows and 12 per cent so far in 2020. Flows from foreign institutional investors (FIIs) have been a big positive for the year.
However, stocks like Future Consumer, GE Power India, Future Lifestyle, Indiabulls Housing Finance, Sterling and Wilson Solar, Varroc Engineering, Welspun Corp, Edelweiss Financial Services, PNB Housing Finance and Chalet Hotels failed to scale new 52-week highs after the market crash and still remain laggards on a year-to-date basis.
Investors shall measure the performance of midcap and smallcap stocks from the peak levels of January, 2018, said Chokkalingam. “If these stocks have beaten those levels, we can say they have performed well,” he said.
Analysts advised investors to bet on fundamentals, instead of timing the market. One should keep quality of management, earnings growth and balance sheets in focus. “It is important for a retail investor to study the market and understand the business before picking a stock,” Chepa said.