Sustained selling across the market: more than a quarter of stocks hit 52-week lows

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The sustained sell-off in the broader market has hammered many blue chip stocks. More than a quarter of Nifty500 companies hit a 52-week low last week as growing recession fears sparked selling across the world. As central banks around the world move toward aggressive policy tightening, investors have opted to stay away from risky assets because sucking liquidity from the system would stifle economic growth.

As many as 142 stocks in the NSE500 universe have tested their 52-week lows since June 13 as the index plunged to its lowest levels since May 25, 2021. The index, which accounts for around 90% of capitalization The country’s stock market, with nearly 98% of total revenue, has corrected 18.2% from October highs. The market value erosion of these 142 stocks since October 18 amounts to Rs 26.3 trillion, with TCS and HDFC Bank losing Rs 2.2 trillion and Rs 2.1 trillion respectively.

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Market participants are of the view that if the decline in equities persists, retail investors could also consider taking money out of the markets wherever they are in profit or small losses. Moreover, flows from households could slow as banks raise deposit rates. According to analysts, household asset allocation decisions towards equities are highly dependent on bank deposit rates.

The list features brand names from the information technology and metal space. Shares of the four major IT companies – Tata Consultancy Services, Infosys, HCL Technologies and Wipro – fell to 52-week lows on June 17. Among metals, Tata Steel, Hindustan Zinc, Hindalco Industries and SAIL also fell to their lowest levels. over the past year.

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After last year’s stellar rally, the metal counters are melting sharply with the Nifty Metal Index correcting over 30% in the past two months. The Nifty Metal Index had gained up to 70% in 2021 compared to Nifty50’s gain of 24.1% over the same period. While fear of recession rocked the IT sector, strict lockdowns in China due to its zero-Covid policy in Q2 of CY22 impacted metal counters.

Kotak Institutional Equities argues that the current phase of the IT sector is intriguing where attention has shifted to recessionary scenarios even as current demand is extremely strong. The brokerage, which cut its profit targets for the sector, said: “We are moderating our position and expect normalized global IT spending growth of 3-4% for CY2023E and 7% for CY2022E. We have reduced our FY2023-FY2025E revenue estimates by 2-10% for our coverage universe. »

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