Amid the ongoing uncertainty in the domestic equity market, as many as 32 stocks in the BSE 500 index have plunged over 50 per cent so far from their 52-week high levels. On the other hand, the benchmark equity index BSE Sensex retreated 8 per cent till September 23, 2022 against its 52-week high level of 62,245.43, scaled on October 19, 2021.
Market watchers believe that factors such as weakness in the domestic rupee, outflows by foreign institutional investors and subdued global cues dragged the stock market in the recent past. However, analysts are bullish on select beaten-down stocks amid the ongoing weakness in the market.
With a fall of 72 per cent, Brightcom Group emerged as the top loser in the BSE 500 index. Shares of the company declined to Rs 34.65 on September 26 against its 52-week high of Rs 122.88. Likewise, Dilip Buildcon, PB Fintech, One97 Communications (Paytm), Zomato, Tanla Platforms, Tata Teleservices (Maharashtra), Indiabulls Real Estate, HEG, Zensar, Technologies, Manappuram Finance, Indiabulls Housing Finance, Metropolis Healthcare, Welspun India and SpiceJet also plunged between 57 per cent-71 per cent from their respective 52-week high levels.
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Commenting on the overall market, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, “The dominant dynamic roiling equity and currency markets globally is the combination of relentless rise in the dollar and the sustained rise in US bond yields. So long as this trend continues, equity markets will be under pressure. FPIs turning big seller in India is an indication of the risk-off in equity in emerging markets.”
He further added that this is not the time to buy the dips aggressively. However, there is scope for selective buying in the broader market.
From the beaten-down shares, analysts are bullish on a couple of stocks. For instance, Goldman Sachs is optimistic on Paytm with a target price of Rs 1,100. “While the Paytm stock is down on regulatory headwinds and valuation contraction for high growth companies, we see the business model continuing to show strong traction. Paytm as one of the most compelling growth stories at an attractive price,” Goldman Sachs said in a report.
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On the other hand, IIFL Securities is positive on Metropolis Healthcare with a target price of Rs 1,850.
“Although Metropolis so far catered to only 6 per cent of the population which at any point of time was falling sick and required a diagnostic test, company’s organic network expansion plans will enable servicing wellness needs for the remaining population and will help Metropolis to revert to the mid-teens growth trajectory. EBITDA margins are also expected to improve to pre-Covid levels of around 26.5 per cent (200 basis points QoQ expansion) from Q2FY23. With 12-mth forward valuations at around 38 times price-to-earnings ratio being 15 per cent below pre-Covid levels, we maintain our ‘Buy’ rating,” IIFL Securities said in a report.
Data further highlighted that players such as TV18 Broadcast, Indian Energy Exchange, Godrej Properties, Indiamart Intermesh, Vaibhav Global, HLE Glascoat, Medplus Health Services, Firstsource Solutions, The New India Assurance Company, MRPL, Mastek, Latent View Analytics, Wockhardt, Chemplast Sanmar, Birlasoft, FSN E-Commerce Ventures (Nykaa) and Info Edge (India) also declined over 50 per cent from their respective 52-week highs. IndiaMART InterMESH looks attractive to YES Securities. The brokerage has set a target price of Rs 5,820.
On the other hand, brokerage ICICI Securities is bullish on Chemplast Sanmar with a target price of Rs 725, indicating an upside of 78 per cent from the current market price.
“Chemplast’s Q1FY23 spreads were impacted by various factors including China dumping excess supply into India and other regions, falling PVC/VCM prices pushing buyers to start destocking, which hurt volumes and sharp fall in prices and slower volume offtake leading to inventory write-downs. EBITDA dipped 44 per cent QoQ, which was exacerbated by higher power costs (coal). Considering that the company will record nil PVC spreads for almost half of Q2FY23, we can infer that the full recovery in financials will be visible only in H2FY23. Chemplast has started construction of its custom manufacturing plant while that of the paste-PVC plant is progressing as planned and these plants should go on-stream in FY24,” ICICI Securities said in a report.