Voda idea, BHEL, ZEE see sharp wealth erosion as investors lose Rs 5 trn

Even as benchmark indices have touched new highs, 1,300 stocks have declined more than 35 per cent in year-to-date (YTD), wiping off Rs 5 trillion of investor wealth during this period.

The front line indices — Sensex and Nifty — have gained 15 per cent and 13 per cent, respectively, in YTD. The companies that have seen sharp erosion of market wealth include YES Bank, Indiabulls Housing Finance, Zee Entertainment, Vodafone Idea, and Bharat Heavy Electricals.

According to market experts, given the weak market conditions, market-selling has been frantic even at the slightest hint of governance concerns or inability to meet debt obligations.

“Corporates with high leverage have been at the receiving end. Also, markets have shown little tolerance for any governance concerns, with even large-cap companies coming under selling pressure,” said an analyst.  

Shares of public sector undertakings (PSUs) have also taken heavy hits due to questionable capital allocation policies, and decisions taken keeping in mind the interests of the promoter, rather than minority shareholders.

Market players said cash levels in PSUs have been the biggest draw for investors, but these have got depleted due to high dividend payouts, despite poor profitability.

Analysts said that many PSUs dipped into their cash reserves or accumulated earnings to pay out dividends, which were required to shore up government exchequer.

The fortunes of some large PSUs got hit due to adverse commodity and capital expenditure cycles. The fear of continuous government interference also led to investors dumping PSU stocks.

Overall, the economic slowdown had a negative impact on most sectors, with the weakest of the lot bearing the brunt.

“Metal stocks suffered due to global slowdown, lower demand and pricing power, and the consequent lower operating leverage. Telecom companies suffered due to industry becoming more competitive and regulatory charges remaining high, while non-banking financial companies suffered due to unavailability of liquidity and asset quality issues in real estate and other spaces,” said Deepak Jasani, head of research (retail), HDFC Securities.

Also, there was flight towards safety, with large institutional players like mutual funds curbing their exposure to the mid- and small-cap space.

“Investors preferred to park their funds only in those companies with good quality management, steady business models, and decent growth potential,” said Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services.

Going forward, market participants say investors should tread with caution and only look for quality companies among the beaten-down stocks.  

“Some of these companies will never make a comeback and face extinction. However, there are some good quality stocks which fell because of the collateral damage amid the overall weak sentiment in the broader markets,” said Ambareesh Baliga, independent capital markets professional.

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