These four stocks soared over 50% in May; will the rally continue?

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The month of May has been momentous for equity investors as the market capitalisation of all listed companies crossed the $3-trillion mark while the Nifty50 index too touched a new record high of 15,469. Until May 28, Sensex has surged 5.41%, increasing investor wealth by Rs 14.15 lakh crore to Rs 221.18 lakh crore. Even the broader market posted a fresh record high this month. BSE MidCap index touched a new high of 21,844.75 on May 25, 2021 whereas the BSE SmallCap touched 23,743.32 on May 28, 2021.

A closer look at of BSE 500 index reveals that 38% or 188 constituents of its index delivered double-digit returns to investors in the month of May. Dish TV’s scrip stood out, rallying from Rs 9.27 to Rs 15.89. Lux Industries (up 71.17%), HFCL (up 63.13%) and Venkys (India) (up 51.52%) are the the other stocks that rallied over 50% this month.

“Steady decline in fresh covid cases, expectations of another set of relief measures, global cues and improved corporate earnings buoyed the market. As per reports, the central government is preparing the next set of support measures in order to minimise the economic impact of the second wave, especially in the worst-hit sectors,” said Vinod Nair, Head of Research at Geojit Financial Services.

Top gainers

Bharat Heavy Electricals (up 48.76%), TCI Express (up 48.49%), Gateway Distriparks (up 47.25%), Schneider Electric Infrastructure (up 43.61%), Adani Transmission (up 37.60%), Tata Coffee (up 37.51%), CCL Products (India) (up 36.23%), MMTC (up 35.45%) and Orient Cement (up 35.42%) were among other majors gainers of the month.

Outlook

The month of June is going to be eventful for US$/INR with RBI MPC (Monetary Policy Committee) outcome and the US NFP (Nonfarm Payrolls) data. RBI MPC will continue to maintain its accommodative stance, but the focus will be on the outlook of the central bank over the spill-over effect of the second wave of Covid-19 on economic growth.

That apart India’s gross domestic product (GDP) for the first quarter will be released on 31 May 2021. India’s infrastructure output data for April will be unveiled on 31 May 2021. Markit Manufacturing PMI for May will be declared on 1 June 2021. Markit Services PMI for May will be declared on 3 June 2021. Investors will also be looking forward to a stimulus package to overcome the economic impact of the second wave.

Besides, the movement of the rupee against the dollar and crude oil prices, the trend in global stock markets will dictate the trend on the bourses in the near term. Investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) will be monitored.

The key thing to watch out for in the near future would be the US bond yields because any rise in yields can take out the FII money from developing countries like India to western markets and could also be a risk for emerging markets currencies.

Expert view

“Hopes of further stimulus by the government will be bolstering investor confidence. Thus, as the second Covid-19 wave continues to recede in India and pace of vaccination expected to pick up from next month, we expect the long- term fundamentals to remain intact and the journey to become little smoother,” said Hemang Jani, Head Equity Strategy, Broking & Distribution, Motilal Oswal Financial Services.