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When the bulls return, they will deliver multibagger returns on these counters

Blue chips' recovery to previous levels can result in multibagger returns.

, ETMarkets.com|
Last Updated: Apr 15, 2020, 05.07 PM IST
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This happened in the one year following the market crash after the 2008 Global Financial Crisis (GFC), during 2000's dot-com bubble bust and even during the 1992 stock market crash.
NEW DELHI: Whenever anguished bulls come back roaring from a brutal battering, they tend to throw up multibaggers. History is testimony.

This happened in the one year following the market crash after the 2008 Global Financial Crisis (GFC), during 2000's dot-com bubble bust and even during the 1992 stock market crash following the Harshad Mehta scam.

While the ongoing lockdown casts doubts over the status of many small and mid-sized companies as going concerns, shares of a host of stronger blue chips have fallen so low that their recovery to previous levels can result in multibagger returns.

Using a reverse discounted cash flow (DCF) model to calculate what growth rate the market is applying to the current stock price, JM Financial concluded that current prices of Nifty constituents ONGC, Coal India, UPL, GAIL, Tata Motors, M&M, Wipro, Bharti Infratel and HCL Tech are factoring in negative growth for the next 10 years.

Within financials, IndusInd Bank and PSU bank stocks are pricing in a growth rate of less than 6 per cent while Kotak Mahindra Bank, HDFC Bank, ICICI Bank are penciling in a double-digit growth.

In the past, many bluechip stocks staged smart rebounds after falling up to 90 per cent from their peak values.

For example, Axis Bank had plunged 78 per cent from its peak during the GFC selloff that lasted till March 2009. The stock then rebounded 304 per cent in the next one year. Aurobindo Pharma plunged 88 per cent from its peak to hit a low in November 2008, only to surge 650 per cent in next one year. Federal Bank, Larsen & Toubro and Tata Motors also gained up to 425 per cent, after falling 73-87 per cent during the GFC selloff.

In the post dot-com selloff of 2000, Dabur India, HCL Tech, Infosys, M&M and Wipro jumped up to 160 per cent. They had fallen 82-93 per cent during that selloff. ACC, ITC and Castrol India were some big gainers post 1992 selloff.

"Going by history, the current bear market offers one such rare opportunity to hunt for good bargains," said ICICI Securities.

In last one month, stocks such as IndusInd Bank, Bajaj Finserv, Bajaj Finance, Axis Bank, ICICI Bank, SBI, Eicher Motors and JSW Steel have fallen 22-49 per cent. The fall from their January highs has been even steeper.

Antique Stock Broking has recommended buying value stocks where marginal of safety is high. By this, it suggests passing of many valuation screens, including a 4 per cent dividend yield and cash and cash equivalents (as a percentage of market capitalisation) of more than 10 per cent.

“Stocks that fit the criteria are ITC, HCL Tech, Wipro, Tech Mahindra, Coal India, Power Grid, Adani Ports, GAIL India, HPCL, BPCL, Gujarat Gas and NMDC," it said, while advising investors to stay away from high leveraged firms and low quality, high-beta stocks.

The market sentiment continues to remain bearish on a near-term basis, said Arun Kumar, Market Strategist at Reliance Securities. "But these conditions should be utilised over the next few months to construct a good portfolio from a three- to five-year perspective for capital gains," said he.
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