Metals, realty & banks gained most post Budget; are they still good bets?

NEW DELHI: High-beta stocks from metal, real estate and banking sectors ruled the roost in the post-Budget rally, which raised the BSE100 7.94 per cent in just 11 sessions, showed an analysis by ETMarkets.com.

Stocks with beta value of more than 1.55 surged up to 28 per cent in the equity rally since March 1. As many as 22 stocks that rallied had beta values of more than 1.55 and 16 of them outperformed the BSE100 index during this period.

Of these 22 companies, the sectors that saw most gained were real estate, banking and metals. (See chart)




The beta value of a stock is the measure of its inherent systemic volatility. In simpler terms, it represents how a stock will react to any change in the broader market or the index that it is part of. Generally, stocks with beta value of one or above are expected to gain more than the market or fall more than the market.

Stocks from the real estate sector surged the most, with Unitech leading the way with a 27.8 per cent gain in the post-Budget rally. The real estate space had received a number of booster shots from the Budget. The recent passage of the Real Estate (regulatory) Bill has also aided the movement in realty stocks.

Stocks with beta values of more than 1.55 included HDIL (up 15 per cent), JP Associates (1.11 per cent) and DLF (23 per cent).

But analysts are not convinced the pain in real estate is over. “I believe the real estate crash is not over yet. So we are going to see a significantly higher correction in this space. I would not buy a real estate company right now,” said Deepak Shenoy, Founder, Capital Mind. (See chart)



High-beta stocks from the metals space also hogged the spotlight in the backdrop of increased government steps to protect the industry from huge steel imports from China and the surge in commodity prices globally.

Shares of Tata Steel, which has a beta value of 2.03, surged 21 per cent in the post-Budget rally. Other top high beta gainers included JSW Steel (15 per cent), NMDC (8.45 per cent), Hindalco (19.16 per cent) and SAIL (21 per cent).

Experts, though, aren’t too positive on the space. “Fundamentally, one would not like to bet on metals in a big way because China is slowing down. But technically, the kind of premium that got built in for growth and the quality we are seeing call for a little bit of rebalancing. We would not be very excited on metals despite this short term bounce,” said Rahul Singh, Ampersand Investment Advisors. (See chart)

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The third major sector was private banks, led by the ICICI Bank, which surged 18 per cent in the rally. The stock has a beta value of 1.89, the highest in the banking pack. The catalyst for the banking space was the RBI move to redefine tier-I capital that infused further Rs 35,000 crore into balance sheets of the domestic lenders, both private and public.

Experts have been gung-ho on the private banking space, but not so much on the public ones. “We believe retail-focused private sector banks will be enablers of the consumption demand when it grows. We are positive on some of the retail-focused private sector banks,” said Harsha Upadhyaya, CIO- Equities, Kotak AMC. (See chart)


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Others stocks with high beta values that gained in the market included Reliance Capital (10 per cent), Reliance Infrastructure (24 per cent), Adani Enterprises (9 per cent), LIC Housing Finance (11 per cent), and AB Nuvo (5.4 per cent).