At least 21 Dalal Street listed companies have been consistently reporting losses for as many as the last four quarters but their stocks have delivered a whopping return of up to 4,500% in the last one year, the data from AceEquity suggests.
The list includes stocks from across the sectors including autos, textiles, telecom, IT, FMCG, financial services, metals and mining, pharmaceuticals and real estate among others.
Market participants believe that such rallies might be driven by the decent fundamentals and takeover buzz in these companies. However, not all of them have fundamental issues aligned with them.
G Chokkalingam, Founder and Managing Director, Equinomics Research and Advisory said that discounting the future earnings is the basic fundamental of the equity markets. “If the futures appear to be bright, investors digest short-term jerks.”
There are a number of companies with opportunities for turnaround or acquisitions or both, which may attract the investors, he said. “If there is some underlying opportunity, the stock prices may go up in the near future.”
The list is topped by SEL Manufacturing Company, which has rallied 4,461% till November 23 in the last one year. The textile player with a total market cap about Rs 1,800 crore has reported a net loss between Rs 24 crore to Rs 51 crore in the last four quarters.
It is followed by Swan Energy, which has reported a net loss of up to Rs 58 crore in the last four quarters, but the stock has almost doubled investors wealth in the last 12 months, rising 95%.
Atul Auto, Shalimar Paints and Responsive Industries have also been reporting a negative bottomline but their stocks have zoomed 43%, 36% and 27%, respectively, despite reported losses in the last four quarters.
DFM Foods, 63 Moons Technologies and HCL Infosystems have also reported a net loss since the December 2021 quarter till September 2022 quarter, but the stocks of these companies are up 20-23% in the last one year.
Despite reporting a quarterly net loss in the range of Rs 350-550 crore in the last four quarters, shares of Jaiprakash Associates have gained 18% in the last one year, the data suggests.
Tata Teleservices (Maharashtra) is the largest company in the list with a market cap of about Rs 19,000 crore. Its net loss ranges between Rs 280-300 crore every quarter in the last four, but the stock is 18% up in the last one year.
Ignoring the negative bottomline for four quarters till September 30, 2022, Aurum Proptech, Dhunseri Ventures and RattanIndia Power have delivered double digit gains to the investors in the last one year, rising up to 17%.
HMT, The Orissa Minerals Development Company, Omaxe, Mahanagar Telephone Nigam, Thomas Cook (India) and Orchid Pharma are the other companies which have delivered positive returns despite negative performance in the balance sheet.
Market analysts suggest that when a particular sector is in favour, all stocks from the space tend to rally but investors need to remain cautious of the fundamentals.
Yash Gupta from Thinksight Advisory said that such stocks have limited float in the market and retail investors continue to buy their counters as their focus is only on the returns and not fundamentals.
“Rising raw material prices, increasing expenses and pressure on margin may dent the bottomline of the company,” he said. “One must consider these factors, coupled with valuations before entering a counter but stay off the junk.”
Chokkaligam said that some companies might have some trouble in their balance sheets and suggested investors should consider the management quality, listing experience, debt levels, working capital, business model and valuations before investing in any company.
(With data inputs from Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)