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5 low-rung stocks that doubled investor wealth on depressed D-Street this year

Some 23 other stocks delivered more than 50 per cent returns since the start of 2019.

Last Updated: Nov 25, 2019, 10.47 AM IST|Original: Nov 25, 2019, 10.47 AM IST
The broader market pack has thrown up a few multi-baggers this year even as the benchmark indices went through a roller-coaster ride. Most of these high-fliers came from the financials space.
Mumbai: While benchmark Sensex hovers around its record high, the broader BSE500 index has underperformed, underlining the fact that the ongoing rally is not broadbased.

Yet, the broader market pack has thrown up a few multi-baggers this year even as the benchmark indices went through a roller-coaster ride. Most of these high-fliers came from the financials space.

Five BSE500 stocks have more than doubled investor wealth since the start of 2019. They included asset management companies HDFC Asset Management Company and Reliance Nippon Life Asset Management, non-banking finance companies CreditAccess Grameen and Aavas Financiers, and Adani Group firm Adani Green Energy.

Besides, some 23 other stocks delivered more than 50 per cent returns during this period.

Shares of HDFC Asset Management risen 136 per cent for this period to emerge top performer. The asset manager is now market leader across actively-managed equity and liquid fund categories with 15.5 per cent and 18.9 per cent market shares, respectively. The fund house comes second in the debt segment with a 13.4 per cent market share.

In a October 29 report, JM Financial maintained a ‘buy’ rating on the stock, with a price target of Rs 3,175, valuing the company at 41 times September 2021 price to earnings.

The BSE-500 index closed at 15,355.38 on Friday, and was 3.79 per cent, or 582 points, away from its record high hit on September 3, 2018. On a year-to-date basis, Sensex is up 12.65 per cent, while BSE 500 index has added a mere 6.30 per cent.

Next in line was Adani Green Energy, which swung to profit in September quarter and posted a consolidated net profit of Rs 102 crore against a Rs 188 crore loss in the year-ago period.

The stock touched a record high of Rs 100.50 on Wednesday. The company was listed in 2018. Adani Enterprises had announced demerger of its renewable energy business into associate company Adani Green Energy as part of its efforts to simplify the overall business structure.

Shares of Reliance Nippon Life Asset Management have risen 129.31 per cent year to date. “With Nippon increasing stake to 75 per cent, the management believes given the promoter’s global relationships and repute among institutions, it would be able regain lost market share. However, there is no timeline for this,” Axis Securities said in a November 18 note, recommending a ‘hold’ rating on the stock.

“While Reliance Capital’s exit augurs well for the AMC in the long run, much of the positives appear priced in with performance moderation in a challenging macro environment. Structurally, the AMC business in India remains a long-term growth story due to low penetration, which will be beneficial for RNAM,’ Axis Securities said.

Shares of Credit Access Grameen and Aavas Financiers have risen 108.67 per cent and 100.55 per cent, respectively, since the start of 2019.

CreditAccess got listed on the bourses in August 2018, and Aavas Financiers in September 2018. CreditAccess has surged 85.45 per cent from its issue price of Rs 422 and Aavas Financiers 105.8 per cent from its issue price of Rs 821.

In a October 31 note, Narnolia Financial Advisors said CreditAccess Grameen has been able to maintain strong growth of 36 per cent along with pristine asset quality.

“The management is focusing on declining its geographical skewness. It has already finished off 95% of the expansion target of the year and has kept the branches and trained employee ready to cash in on opportunities in the 2HFY20,” Narnolia analysts said, maintaining a ‘buy’ rating on the stock.

“Margins have remained affected during the quarter, and the management has guided for stability in cost of borrowings, which will lead to help improvement. Although credit cost has risen in the near term on the back of incessant rainfall, we remain optimistic of the trend line in the 2HFY20 on the back strong rabi crop expectation,” they added.

Some analysts believed while Aavas has a compelling story to tell, the valuations were getting into the expensive zone.
In a October 29 note, Edelweiss said it believed Aavas has all the right ingredients to scale up led by niche customer profile, prescient investments, excess capital; and strong execution capabilities.

“While the company is a compelling growth story, the stock trades at 5.1 times FY21 earnings price/book value against an RoE (return on equity) profile of 14–15 per cent, not to mention the company’s limited operating history (compared with Bajaj Finance and Bandhan). All of these imply limited scope for a valuation re-rating,” Edelweiss said. It has a ‘hold’ rating on the stock.
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