HALF OF BSE500 CHANGED SINCE LEHMAN
Crisis-struck decade marks exit of 227 stocks from the BSE500 index, making it the highest index churn in a post-crisis period
The BSE Sensex’s journey from 13,500 on September 15, 2008, when the Lehman crisis struck world markets, to 36,500 now, is taken as an indicator that the demons of that episode are in the past.
A finer reading of the BSE500 shares — largely reckoned as safe to invest, owing to depth in trade volumes, market capitalisation and trading frequency — paints another picture. From the day the crisis first impacted Indian equities, 227 stocks have seen an exit from the BSE500, or a little over 45 per cent in 10 years.
Previous periods of market correction for Indian stocks — the Harshad Mehta scam in 1992, the Dot- Com bubble in 2000 and from then till the Lehman debacle — had seen less than 100 exiting the BSE 500. “Lehman has definitely had a more far-reaching implication on the markets,” says Ambreesh Baliga, an independent expert.
There are multiple reasons. One is the rise in bankruptcy and related winding up of companies, particularly since 2015. Others were mergers and acquisitions, and voluntary delisting. Further, sectors such as infrastructure and power, favourites during 20032008, lost sheen thereafter.
“Index change often reflects change in the underlying economy. It also reflects investors’ acceptance to newer themes and how they don't prefer to stay with stocks that don't perform,” says Andrew Holland, chief executive at Avendus Capital.
With newer themes such as diagnostic centres, specialised health care and insurance taking centre-stage lately, stocks such as Thyrocare, Endurance Technologies, Advanced Enzymes, HDFC Standard Life and ICICI Lombard have received preference over the traditional names.
Past favourites that dominate the list of exits include Essar Ports, Gammon India, Kingfisher Airlines, Ranbaxy Laboratory and Everonn Education.
And, of the 273 stocks which continue to be part of the BSE500 index, 158 trade in the red. This includes Educomp Solutions, Moser Baer, Punj Lloyd, Bilcare, Reliance Communications and Suzlon Energy, which have lost over 95 per cent of market capitalisation from the September 2008 levels. At the time, these stocks had positive ratings from analysts.
Names from the financial segment, health care, consumer staples and durables have largely been beneficiaries in the past decade. Bajaj Finance, Eicher Motors, Shree Cement, TVS Motor, IndusInd Bank, Britannia Industries and Amara Raja Batteries have been among the top multi-bagger mid-cap to large-cap stocks in the past decade, with compounded annual growth rate in returns of 35-70 per cent.
U R Bhat, managing director at Dalton Capital Advisors, urges investors not to have a laid-back approach when dealing with stocks. “Terminal decline for a stock happens over time and investors must make an exit at the right time,” he warns.