Top 5 under-performing stocks in 2011 !

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Early this week, we enlisted top 5 out-performing stocks – HUL, ITC, Ambuja Cement, Bajaj Auto and Kotak Mahindra Bank – amongst the Nifty 50 stocks in 2011. While the benchmark index settled for a negative return of 21% from the start of the year till date, these winners yielded positive returns to out-perform the markets.

However, we can not ignore the list of laggards during so-called disappointing year 2011 for the equity investors. In fact, you would be surprised to know that the worst performers of this calendar year have lost almost 50% from their year opening quotes.

Exactly! If you had invested your hard earned money in any of the below listed stocks, your principal money would have halved by now, leave alone the lost opportunity of garnering interest on such amount from any fixed interest asset class. Over here, we enlist top 5 under-performing stocks in the Nifty index during the year 2011:

images thumb Top 5 out performing stocks in 2011 !

SAIL (-56%)

Maha-navaratna PSU Steel Authority of India has emerged as the worst performer in the year 2011 with a negative return of 56% since January 2011. The stock prices of most of the metal players, including Sterlite, Hindalco and SAIL, have been under pressure due to relatively muted volume growth and higher raw material costs.

Moreover, this state-owned steel company has clearly stated that the growth in India’s steel consumption is likely to slowdown to 6% this fiscal year on account of weak economy affecting demand.

Reliance Infrastructure (-55%)

ADAG company Reliance Infrastructure is the next worst performer from the elite list of Nifty constituent stocks. This infrastructure company is one of the biggest casualties in the ailing sector marred by delayed project roll out, stalled government spending and lower margins in the business.

One reason for the depressed stock price is also said to be the group’s alleged involvement in routing money raised through overseas bonds to the stock markets few years back, indicating regulatory overhang on the group.

Reliance Power & Reliance Communications (-50%)

The third spot for hugely under-performing share prices has been shared by two other companies from the same ADAG companies operating in the telecom and power sector.

While the commissioning of Reliance Power’s Sasan ultra mega power project has been delayed by over 12 months, the power sector is struggling with fuel linkages for their respective power projects and debt restructuring to meet their liabilities.

On the other hand, the share price of Reliance Communications slumped on poor subscriber growth after implementation of MNP, alleged involvements in the 2G scam and quarter on quarter losses; tarnishing the image of the Group.

Sesa Goa & Hindalco (-48%)

Not surprisingly, the investor’s favorite stock Sesa Goa has been hammered out-of-shape this time around, largely attributable to mining ban in Karnataka, discontinuing of operation in Orissa and planned reduction in inventories.

Besides, Hindalco also fared disappointingly on the bourses hit by falling aluminum prices, weaker demand for the metal on account of recession hit economic growth globally, higher input costs and under pressure operating profits.

List of other under-performing stocks in 2011:

  • Sterlite Industries -47%
  • BHEL -44%
  • J P Associates -44%
  • IDFC –43%
  • L&T – 41%
  • ICICI Bank -39%
  • SBI -36%
  • Tata Motors -32%
  • Jindal Steel -28%
  1. chandra shekhar singh says

    tatasteel may be included in the list underperforming.

  2. Mayank Gupta says

    Rather than only looking at valuation parameters, also look at fundamentally sound companies like Lupin, IDFC and Larsen and Toubro

  3. saihai says

    You have explained things quite fantastically !

  4. Stable Investor says

    These are times of crisis in which, many stocks look cheap on various valuation parameters. But all stocks are not equal.
    It is good to stick with those stocks which have the capability of weathering such economic storms. These are the stocks which one should start accumulating in times of crisis. We did a similar analysis at http://www.stableinvestor.com/2011/11/large-cap-nifty-stocks-available-at.html and found that SAIL and Sterlite Industries are cheap and good long term buys. Retail investors can start accumulating these fallen gems in a disciplined (regular) manner.

    1. Viral says

      Quite agree with the explanation provided by you that valuation should not be the only parameter in taking buy/sell decisions. Business prospects, sustainability, sector outlook, etc are also equally important on the backdrop.

  5. Mayank Gupta says

    I think, one should avoid Reliance ADAG stocks like Reliance Power, Reliance Communications as mentioned by Viral although the valuations looks quite cheap

    1. Viral says

      Agreed Mayank, that valuations in some of the ADAG stocks are cheap, but you never know, how long the discount sale will linger in the shares of companies crippled with several problems.

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