IndusInd Bank, Tata Motors, and Asian Paints among 23 Nifty 50 stocks down up to 41% from recent highs

Indian stocks have made a notable comeback in recent sessions, buoyed by expectations that the Reserve Bank of India (RBI) will announce supportive measures in the upcoming Monetary Policy Committee (MPC) meeting to stimulate the economy.

The market anticipates a possible cut in the Cash Reserve Ratio (CRR) as the banking system struggles with tight liquidity conditions and concerns over economic growth, as GDP expansion slowed to a seven-quarter low of 5.4 per cent in the July-September 2024 period, highlighting the need for immediate policy intervention.

Amid these growing expectations, the Nifty 50 and Sensex have surged over 2.3 per cent in the last four trading sessions. However, only a few stocks contributed to this rally, while others continue to struggle, with many of them maintaining their downward trend that began after the September quarter results.

Among the 50 constituents of the Nifty 50, 23 stocks are currently trading at significant discounts, with declines ranging between 15 per cent and 41 per cent from their recent highs. Leading the fall is IndusInd Bank, which is trading 41.38 per cent below its peak of ₹1,694.

Weak September earnings triggered a sharp selloff in the stock, pushing it to a 21-month low in November and ending the month with a steep 27 per cent cut, marking its worst monthly decline since March 2020.

Automobile stocks have also faced notable corrections, with Tata Motors, Bajaj Auto, and Hero MotoCorp down by 33.53 per cent, 30.87 per cent, and 26.08 per cent, respectively, from their 52-week highs. 

Additionally, other Tata Group stocks, such as Tata Consumer Products, Tata Steel, and Trent, have fallen by up to 24 per cent from their one-year peaks.

FMCG heavyweights Nestlé India and Hindustan Unilever have experienced corrections of up to 20 per cent from their recent highs following their September quarter results.

Adani Group stocks, including Adani Enterprises and Adani Ports & SEZ, have also seen sharp declines, as have PSU stocks like ONGC, Coal India, and BPCL, with losses of up to 33.53 per cent. Other notable Nifty constituents, including Asian Paints, SBI Life Insurance, Britannia Industries, and Bajaj Finserv, are down by as much as 30 per cent.

Sharp declines but no deep discounts

Domestic brokerage firm Kotak Institutional Equities, in its latest report, said that the recent correction has not created any meaningful investment opportunities in the market. It highlights that the disconnect between price and value remains significant across most sectors and stocks.

The report noted that the largest corrections have occurred in two broad categories of stocks: consumption-related sectors, where earnings downgrades have kept valuations elevated, and ‘narrative’ sectors, where valuations have shifted from being extremely frothy to merely frothy.

Minimal probability of repo rate cut in Dec’24 policy

SBI Capital Markets, in its latest report, indicated that despite the growth falling short of projections, the RBI is expected to maintain the repo rate in the December 2024 policy meeting, prioritising inflation control and external stability.

With CPI inflation rising above 6 per cent year-on-year and the Indian rupee hitting record lows amid a strengthening US dollar, liquidity pressures have intensified.

The sharp decline in forex reserves and volatile foreign institutional investor (FII) flows are likely to keep the RBI cautious, adopting a wait-and-watch approach to the US Federal Reserve’s policy actions while striving to preserve a reasonable interest rate differential.

The recent rupee outflows have exacerbated liquidity deficits, prompting multiple Variable Rate Repo (VRR) auctions in late November 2024, further fueling expectations of a potential CRR cut in the upcoming policy announcement, according to the report.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.