After steep decline, these multibaggers aren't in ‘August’ company

New Delhi: August has been a mixed bag for the domestic equity market as benchmark indices are scaling new lifetime highs, whereas second-rung stocks are bleeding.

The correction in the midcap and smallcap counters has eroded a big portion of these stocks’ gains in August so far, after delivering multibagger returns in the first seven months of the calendar year.

According to data from AceEquity, as many as 40 stocks have tanked 10-26 per cent in August, at least 15 of these stocks delivered over 100 per cent returns from January 1 to July 30.

Devang Mehta, Head-Equity Advisory, Centrum India, said markets were up by 110-120 per cent. "If we cannot digest a 5-7-8% correction at this level after such a huge rally, it is going to be difficult and corrections will be a part of the bull market."

The BSE Sensex has surged about 6 per cent in August, but the mayhem in midcaps and smallcaps has dragged the respective indices lower by 4-5 per cent during the period.

Sampath Reddy, CIO, Bajaj Allianz Life Insurance, said this was a small correction. "The valuations have been on the higher side, but that is how it has been. Fed (the US Federal Reserve)’s tapering and liquidity tightening will drive big corrections in the market," he added.


Hyderabad-based cement player HIL Limited, which gained as much as 180 per cent in the year till July 31, has corrected the most to 26 per cent.

Similarly, Inox Wind, Indian Metals & Ferro Alloys, GNA Axles and Olectra Greentech delivered between 120 and 235 per cent since January 1 before correcting over 20 per cent.

"GNA Axles’ Q1FY22 result was above our estimates on all parameters. EBITDA margin was higher due to lower other expenses. Revenue was above our estimates," said IDBI Capital in its recent report. It has given the stock a hold rating with a target price of Rs 570.

NR Agarwal, Tejas Networks, Mahindra Logistics and GHCL are some of the other companies that have declined over 20 per cent in the initial three weeks of August 2021. All of them delivered 50-90 per cent returns till July 31.

Domestic brokerage firm ICICI Direct has given a buy rating to Mahindra Logistics, with a target price of Rs 710, whereas IndSec is bullish on GCHL, giving it a buy rating and a target price of Rs 438.


Privi Speciality Chemicals, JK Paper, Trident, Poonawalla Fincorp, National Aluminium Company (Nalco), Sarda Energy & Minerals, Century Enka and Balrampur Chini Mills have declined over 10 per cent in the current month after surging between 100 and 330 per cent.

Brokerage firm Emkay Global is bullish on Poonawala Fincorp. It has a target price of Rs 195 on the counter. Motilal Oswal has given a buy rating to Nalco with a target price of Rs 93. Kotak Securities has suggested reduce on JK Paper, with a target price of Rs 295. JM Financial expects Trident to outperform in the home textile space.

Saregama India, Happiest Minds, Balaji Amines, Dalmia Bharat Sugar, Bajaj Hindusthan Sugar, Gujarat Fluorochemicals and Alkyl Amines Chemicals are some of the other players that have delivered negative returns in August after surging up to 485 per cent till July 30.

"The seasonality in the data is very clear. The market has always had a very good turnaround from the end of September, October. If your investment style is for six to 12 months minimum, then there is no need to be too defensive," said Manish Singh, CIO, Crossbridge Capital LLP

More than 120 stocks have rallied 100-500 per cent during January-July and of these, only three dozen stocks have been able to continue delivering positive returns in August. The remaining 85 stocks have declined, the data showed.