Year Ender 2021: Pharma, FMCG to unlock theme - these stocks are top underperformers in 2021 – analysts tell what future holds for them

As we come to the end of 2021, the Indian markets, including broader markets haven’t performed as stupendously as it did in the year 2020. The market, in fact, last year had seen the worst dip and also recovered with the same pace, better than this year.

The benchmark indices such as BSE Sensex and Nifty50 each gained around 24 and 26 per cent respectively, mainly due to the second wave of covid and the impact of the same on the earnings of the companies. The recent results quarter has witnessed a major dent in the margins across sectors.

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As compared to benchmarks, Nifty Pharma, FMCG, Private Bank have been underperformers so far in 2021, despite being defensive stocks. Lupin, Aurobindo, ITC, Nestle India and HDFC Bank saw a marginal growth of up to 10 per cent in 2021, while Kotak Bank slipped by 4 per cent in the last one year.

According to Raghvendra Nath, MD of Ladderup Wealth Management, “The pharma story has already been played out in India during the first wave of COVID and we believe that pharma as a sector is quite richly valued currently, so one should not expect much valuation re-rating from the sector for time being though sector will continue to grow at a healthy pace.”

Similarly, “FMCG is a defensive business with low growth and expensive valuations, any chances of hike in interest rate will lead to valuations de-rating,” the Ladderup Wealth Management MD said.

TradeSwift’s Director Sandeep Jain, who is also an independent analyst with Zee Business, pointed out that the stocks and sectors related to unlock theme have majorly underperformed. From hotels and to theatre and paper to education stocks and segments have remained muted in the year 2021.

Similarly, the semiconductor chip shortage issue had also been the disruptor for auto and auto ancillary sector stocks mainly from Tyre, Lubricants, and auto components segment, the market analyst said, adding further that Gulf Oil and Castrol have been the biggest underperformer.

He, however, also states that all these stocks and sectors are fundamentally good and doesn’t mean if they didn’t rally in 2021, they won’t give profit further. The external factors may have impacted these different stocks and sectors, but has huge potential to grow going forward, Jain explains.

Auto majors like Bajaj Auto, Hero MotoCorp, and Maruti Suzuki have been among the biggest losers in the large caps in 2021, Rahul Shah Co-Head of Research, Equitymaster said. “These stocks have found the going tough against a backdrop of subdued demand, chip shortages, and the growing threat from Electric Vehicles.”

Being bullish about the auto sector altogether, the Shah said, “There's no doubt these three companies boast of a fantastic track record. But the two-wheeler players seem better placed in terms of valuations and a better defense against an EV onslaught.”

Echoing Rahul Shah’s view, Raghvendra Nath said, “Hero MotoCorp saw a decline of over 20 per cent in last one year owing to poor two-wheeler sales. And, it might handicap future growth of the company with the transition to EV in 2W space happening rapidly and lack of EV portfolio.”