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‘Essential’ stocks rally up to 80% ever since March 25 shutdown

Out of 500 index stocks, 377 are now in positive since PM announced the lockdown.

, ETMarkets.com|
Last Updated: Apr 08, 2020, 11.21 AM IST
While work at most Indian factories has come to an grinding halt in the wake of the nationwide lockdown, about one-fifth of BSE500 index stocks have rallied over 20 per cent since March 25.
NEW DELHI: As the domestic equity market tries to come out of the Coronavirus-induced quagmire, a clear pattern is emerging in investor preference for first round buying: businesses linked to supply of essentials and pharma stocks.

BSE Sensex posted its best-ever point-wise single-day gain on Tuesday, as it played catchup with a two-day rally in global equities. On Wednesday, the domestic market showed strength even amid weak global cues.

While there has been all-round buying at the index level, in the broader market investors seem to be heading for a chosen few. While work at most Indian factories has come to an grinding halt in the wake of the nationwide lockdown, about one-fifth of BSE500 index stocks have rallied over 20 per cent since March 25, suggesting value buying in the latest rebound after the recent selloff.

On top of the list of gainers are beaten-down shares of companies offering essential products. Out of 500 index stocks, 377 are now in positive since Prime Minister Narendra Modi announced the lockdown on March 25. As many as 213 of these stocks have risen over 10 per cent and 86 over 20 per cent.

“There is uncertainty, but that goes hand in hand with attractive valuations,” UTI Mutual Fund said in a note.

Shares of rice-processing company KRBL have rallied 75 per cent to Rs 173 from Rs 99 on March 25. In a recent interview, CMD Anil Mittal said as an essential foods business, his company was streamlining supplies to meet consumer demand. “Plants were closed for 6-7 days, before the company received permission to resume operations,” he said, while acknowledging labour shortage.

Despite the rally, the stock is down 52 per cent from its 52-week high of Rs 365 hit in May last year.

Balrampur Chini Mills, which gained 5 per cent in Wednesday's trade, has risen 70 per cent since March 25. MD Vivek Saraogi told ETNOW on Wednesday that the sugar industry was functionally normally.

Hopes that sugar producers in Uttar Pradesh might get permission from the state government to manufacture hand sanitisers also boosted sentiment.

Gujarat Alkalies & Chemicals has rallied 57 per cent since March 25. The company on Tuesday said it has started partial operation of Poly Aluminium Chloride (PAC) & Hydrogen Peroxide Plants at Dahej Complex and Chloromethanes & Poly Aluminium Chloride (PAC) Plants at Vadodara Complex considering the requirements of various municipal corporations and other essential industries.

"The Anhydrous Aluminium Chloride (AAC) Plant at Dahej Complex and Hydrogen Peroxide Plant at Vadodara Complex would start after few days," it said.

Heritage Foods, one of the largest private sector dairy enterprises in South India, has seen its shares rise 46 per cent during the lockdown period.

Being a manufacturer of essential commodities milk and milk products, the manufacturing units situated across India are operating normally to meet the public demand, the company said on March 28.

FMCG stock Emami (up 33 per cent) and drug makers Aurobindo Pharma (33 per cent), Torrent Pharma (32 per cent) and Cipla (30 per cent) have logged handsome gained through this lockdown period.

Himadri Speciality Chemical has soared 78 per cent since March 25, though the scrip is down 58 per cent from its 52-week high of Rs 121. This company informed BSE on March 31 that manufacturing operations and offices would remain shut, except few essential operations, which the company resumed to ensure continuity of business.

Other gainers
Meanwhile, two railway stocks Rail Vikas Nigam and Ircon International have jumped 52 per cent and 44 per cent, respectively. Delta Corp jumped over 40 per cent amid strong interest from ace investor Radhakrishan Damani, who has been buying shares in the company of late.

BSE500 stocks with market capitalisation of over Rs 1,000 crore were only considered for this report.
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