Old economy stocks outperform D-St benchmarks with up to 20% returns in Sept quarter

So far during the quarter, the Sensex has rallied less than 8%, while BSE Teck is down 3% and BSE IT index has lost 4% of its value as investors continue to dump IT stocks.

“With balance sheets of corporates being strong, combined with utilisation levels inching towards optimum levels, the capex cycle revival is expected to lead to a strong boost in orders for industrial and capital goods companies. This combined with China plus one strategy and Europe plus one story emerging, the narrative of India transitioning towards upping its manufacturing presence on a global level only strengthens,” said Nitasha Shankar, PRS – Head Research, Yes Securities.

Top gainers and losers in BSE500

With handsome returns of 70% each, PSU stock Mazagon Dock and

, a holding company of the Tata Group, are the toppers of the second quarter of this financial year in the BSE500 pack

Mazagon Dock’s performance was driven by overall positive investment sentiments in the Indian defence sector led by promising growth outlook given by the Ministry of Defence and supportive government policies to increase indigenization in the coming years. “Further, MDL being a preferred partner for the Indian Navy for constructions and repairs of warships and submarines, growth outlook for coming years has improved considerably,” said Sanjeev Hota, Vice President – Head of Research at Sharekhan.

In the case of Tata Investment, expectation of higher dividend payout and reasonable valuation (was trading at huge discounts to underlying investment value) has driven the recent stock performance along with other holding companies, he said.

On the other hand, top losers in the pack included

(33.5%), Oil India (29%), (28.5%) and (23.6%).

Time to book profits in old economy stocks?

Old economy stocks belong to companies primarily focused on meeting domestic demand.

Hota said the future outlook for next 3-5 years looks encouraging for the industrial and capital goods sector led by China+1 and Europe+1 strategy, coupled with domestic economic upcycle, government policies and India’s increasing importance in becoming a future export hub in manufacturing.

Vikram Kasat of Prabhudas Lilladher, however, said it is time for a change in sectoral leadership. “With the Indian rupee crossing 80 and liquidity getting tight in the domestic market, it’s time for profit booking in desi stocks. Valuations for IT (risk of severe recession remain) and pharma are compelling against runaway multiple expansions seen in desi stocks,” he said.

(With data inputs from Ritesh Presswala, ETMarkets)

Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times.