The Indian equity benchmarks have seen a series of troughs and crests over the past few years as they navigated a sharp correction phase. From plummeting to the depths of 7,511 when nationwide lockdowns were announced to curb COVID-19's spread in 2020, the Nifty 50 index rose to an all-time high of 18,604 in October last year.
And just when investors were beginning to rejoice once again, things took a downswing. Since the beginning of 2022, the markets underwent another bout of volatility; the Sensex fell by 12.34 per cent, and the Nifty 50 index declined by 11.87 per cent.
The equity markets globally have plummeted after Russia invaded Ukraine, disrupting global supply chains and sending prices of everything—from crude oil and wheat to edible oil—skyrocketing. The resultant inflation forced central bankers to squeeze their monetary policies, creating tighter liquidity conditions. As a result, there was a selloff in equities.
Expectedly, things got gradually worse for the equity markets, which were already reeling under pressure. It was already battling a double whammy—tightening of liquidity conditions owing to rising interest rates amidst high inflation. And along came the US Federal Reserve's announcement of hiking 75 basis points to rein in inflation, which incidentally is a new four-decade high mark for the country. This action raised tensions among investors concerned that this move to control inflation might tip the US and other major economies into recession.
During these challenging times, only five stocks in the Nifty 50 basket gave positive returns—Coal India, ITC, Mahindra & Mahindra, NTPC and Reliance Industries.
Coal India: Shares of the country's monopoly player in the coal mining sector have jumped by 25 per cent so far during this year. The sharp uptick in stock price came on the back of increased demand for coal amid high electricity demand after worsening heatwave conditions across the country. Following a record-breaking coal production of 777 million tonnes (MT) in 2021-22, India's domestic coal production has continued to rise in the current financial year. As of May 31, 2022, total domestic coal production in 2022-23 was 137.85 MT, up 28.6 per cent from 104.83 MT in the same period in 2021, Mint reported.
Coal India has increased its coal production by 28 per cent compared to the same period the previous year (as of June 16, 2022). Its domestic coal output target for the current fiscal year is 911 MT, up 17.2 per cent over the previous year.
ITC: The country's largest cigarette maker was late to join the stock market rally, as it underperformed in 2020 and 2021 when markets outperformed. But it has covered this lost ground as its stock has jumped 20 per cent so far this year.
The upwards move can be attributed to an uptick in paper price and its hotel business doing well after a lull of two years, following the easing of travel restrictions. ITC's demand for cigarettes also quickly recovered to pre-COVID levels.
Moreover, taxes on cigarettes have been relatively stable in recent years. This enabled conglomerate to calibrate its price increases to avoid disrupting demand, unlike the higher tax increase environment between FY13 and FY17.
Mahindra & Mahindra: Shares of the country's largest tractor and sports utility vehicle have so far this year surged 19 per cent. Analysts said that strong demand for its cars, the expectation of a normal monsoon, and strong performance in the March quarter of last fiscal year are reasons for a sharp surge in its share price.
Mahindra & Mahindra's newly launched sports utility vehicle, XUV700, is among the top-selling SUVs in the country, with a waiting period of around 12-18 months. Its other SUV, Thar, is also in very high demand with a waiting period of approximately ten months, analysts added.
"XUV700 is seeing strong booking (over 9,500 units per month) despite a high waiting period. It has open bookings of 78,000 units (an overall order book of 1,70,000). Cancellation rates stood at 10-15 per cent. It doesn't expect the waiting period to fall materially as bookings are twice its production rate," brokerage firm Motilal Oswal said in a note.
NTPC: Similar to Coal India, shares of the country's largest thermal power producer have advanced 13 per cent due to increased demand for electricity due to prevailing heat wave conditions. Power generation grew by 17 per cent year-on-year (YoY) in the first two months of the first quarter of the current fiscal, with a 3-year CAGR of 5 per cent.
Thermal power generation increased by 15 per cent YoY, with a 3-year compounded annual growth rate (CAGR) of 4.4 per cent. Generation growth was aided by solid demand, brokerage firm Emkay said in a report.
"We have a Buy rating with a March 2023 target price of Rs 180 as the company remains a play on large fossil assets (with robust cash flow) and strong growth in the renewable energy space. NTPC's standalone generation grew by 16.5 per cent YoY, with a 3-year CAGR of 7.8 per cent. Thermal plant load factor (PLF) stood at 81 per cent in Apr-May'22, up from 72 per cent YoY," the financial services company stated in a note.
Reliance Industries: The Mukesh Ambani-led oil-to-telecom behemoth has advanced 9 per cent this year. The surge in Reliance's share price came on the back of rising gross refining margins.
Reliance Industries' Singapore gross refining margins, a key metric to assess how much it has earned by refining a barrel of crude oil, improved to $25 per barrel, which is at multi-year highs, market participants told Outlook Business.
Additionally, Reliance Industries is refining cheap Russian crude oil, which India is exporting in the wake of sanctions imposed on Russia and selling refined products like petrol and diesel to European countries at higher prices.
Reliance Jio is also continuing with its strong performance as the country's largest wireless telecom player. According to TRAI data, Reliance Industries added 16.8 lakh mobile subscribers in April, cementing its lead in the market, while Bharti Airtel added 8.1 lakh users.
