Portfolio check: Sensex up over 3% in 2018 but 17 stocks lost 50-90%, do you own any?

Are you finding it hard to minimise losses in your portfolio even though benchmark indices are trading well in green in 2018? Well the answer lies in your stock selection, which might be tilted more towards small and midcap stocks.

The broader market did extremely well in 2017 as most multi-baggers belong to either the smallcap or midcap space. In anticipation of a similar move in 2018, most investors raised their exposure to the small and midcap space which failed to deliver in the last five months.

The BSE Midcap and Smallcap indices slipped 11 percent each so far in 2018 compared to a 3.7 percent gain seen in the Sensex. The Nifty rose 1.57 percent in the same period.

Even quality stocks in the small and midcap space saw a sharp double-digit correction which led to huge losses in investor portfolios. Mutual funds with exposure to the small & midcap space too saw a sharp decline.

“The index has been going through a period of correction recently, which led to the fall in the price of many small and midcap stocks. However, it should not alarm investors as those stocks had seen a fantastic rally when the index and frontline stocks were slowly marching ahead,” Jimeet Modi, Founder & CEO, SAMCO Securities, said.

He added that investors should evaluated each stock based on their fundamentals to make a judgment regarding their intrinsic value and growth potential. “Only then, can a decision be made whether to hold the stock or sell them.”

As many as 372 stocks in the BSE 500 posted negative returns so far in 2018. Of the 372 stocks, 17 stocks fell 50-90 percent. These include: DCM Shriram, PTC India, Punjab National Bank, Bajaj Hindustan, Reliance Communications, Kwality, PC Jeweller, and Vakrangee.

Only 129 stocks in the BSE 500 managed to trade in the green this year. These include names like Firstsource Solutions (up 84 percent), NIIT Technologies (up 70 percent), Indiabulls Ventures (up 68 percent), Mindtree (up 65 percent), Tech Mahindra (up 39 percent), Tata Consultancy Services (up 28 percent) and HDFC Bank (up 12 percent).

“The last 4-5 months clearly belongs to selective heavyweights like HDFC twins, Larsen & Toubro, Reliance Industries, Kotak Mahindra Bank, Infosys and TCS. Only those portfolios have done well which had a major allocation to these marquee names,” a spokesperson from Angel Broking said.

What should investors do now?
The strategy would be to reassess the overall portfolio and find out if stocks that have seen double-digit correction are worth holding or is it better to book profits and exit. “If we look at the current market scenario, most frontline stocks are generating positive alpha. Looking at sector-specific performance, midcaps are a laggard. Most investors seems to be holding midcap stocks, so their portfolio may appear to be bleeding in the short term, but if the investor gazes at the long term picture it may give a positive return. So, holding the current stocks seems to be a good strategy,” Ritesh Ashar, Chief Strategy Officer at KIFS Trade Capital, said.

For 2018, most analysts expect the index to experience a time-correction along with in-between hiccups before touching new highs. The index should be able to retest previous highs placed at 11,171 recorded in January.

Modi said he is mildly bullish about the Nifty for the rest of 2018 and expects it to touch 11,100. “However, there is a downside risk too, due to which it is expected to trade in a 10,000-11,100 range,” he added.