In the month gone by, Indian share markets rose on the back of renewed optimism. As foreign portfolio investors became net buyers after nine months, benchmark indices witnessed an uptick.
The Sensex rose by 8.8%, while the Nifty rose by 9%.
However, in 2022, markets are still down.
Tightening of monetary policy by central banks all over the world along with the Ukraine - Russia war, have hit the stock market.
While stocks with exorbitant valuations have fallen drastically, the correction has not spared even the bluest of bluechips.
In this editorial, we cover the five worst performing stocks of 2022 so far. They are from the BSE 100 index.
Check them out.
#1 Tech Mahindra
First on the list is Tech Mahindra.
The company is the IT arm of the Mahindra Group. It provides comprehensive range of IT services to a diversified base of corporate customers.
Shares of the Tech Mahindra are down 41% in 2022 following a broader decline in IT stocks.
IT stocks have been under pressure during the year due to fears of a global recession. May 2022 proved to be a bad month for them.
Disappointing quarterly results also added to the troubles as margins of IT companies declined due to increasing attrition.
For the June 2022 quarter, Tech Mahindra's operating profit margins declined to 11% from 13.2% in the same period last year as employee costs increased.
Attrition for the quarter stood at 22% higher than 17% in the year-ago quarter.
As a result, the company reported a 16.4% YoY decline in net profit. This was despite a 24.6% YoY increase in revenue.
The company's management has said it remains watchful of the global economic environment. They will continue to focus on cost optimisation and cash conversion to offset the headwinds.
It aims to expand the company's profitability through improved operating metrics over the course of the financial year 2023.
Second on the list is Wipro.
The company is a global IT, consulting and business process services (BPS) giant. It is the fourth largest Indian player behind TCS, Infosys, and HCL Technologies.
Shares of Wipro are down 40% in 2022 for the same reasons as Tech Mahindra.
For the June 2022 quarter, Wipro also posted weak results. The company reported a 20.9% YoY dip in net profit. This was despite a 17.9% YoY increase in revenue.
Its operating profit margin also declined to 18% from 23% in the year ago period as employee costs increased. The company added a net headcount of 15,446 during the quarter.
Wipro's attrition rate came in high at 23.3%. However, this was marginally lower than 23.8% posted in March 2022.
The company's CEO Thierry Delaporte said the attrition rate is moderate compared to the previous three quarters. He expects it to moderate in the coming quarters as well.
In the September 2022 quarter, the company expects revenue to grow marginally in the range of 3-5%. It expects the revenue from its IT Services business to be around US$ 2.8 bn.
#3 Larsen & Toubro Infotech (37.8%).
Third on the list is Larsen & Toubro Infotech (LTI).
LTI is the IT arm of the Larsen & Toubro group. It is the sixth largest IT company in India in terms of revenue.
The company's shares are down 36.3% in 2022.
IT stocks witnessed an uptick due to an elevated demand for the services during the pandemic. This led to exorbitant valuations.
However, the rally has slowed down since then taking down with it many overvalued stocks. LTI was one of them.
The stock was trading at an all-time high PE Ratio of 60.7 at the end of December 2021. It currently trades at a PE ratio of 34.5.
So, did attrition impact the company's results for the June 2022 quarter?
The company reported a 27.7% YoY increase in net profit on the back of a 30.6% YoY increase in revenue.
However, operating profit margins fell 1% YoY as its attrition rate increased to 23.8% from 15.2% in the same period last year. The fall is not much as the company was able to optimise its costs.
Going forward, the management has said the order pipeline will ensure that it maintains the deal momentum. It aims to continue to deliver strong growth in the financial year 2023.
#4 Piramal Enterprises
Fourth in the list is Piramal Enterprises.
Piramal Enterprises is one of India's largest diversified companies. The company's businesses are divided into two verticals - financial services and pharmaceuticals.
The stock of Piramal Enterprises is down 35.1% in 2022 following its acquisition of debt-ridden Dewan Housing Finance Corporation Ltd (DHFL). The acquisition meant that the company would acquire distressed loans from DHFL's loan portfolio.
Officials from the distressed asset market said it is unlikely that Piramal Enterprises would receive any counteroffer for them.
However, the management has said it is aiming at a loan disbursement of about Rs 35 bn in the next quarter on the back of this acquisition.
It also aims to grow its life insurance business in the coming years, through its acquisition of Pramerica Life Insurance.
For the June 2022 quarter, the company's net profit dropped 9% YoY due to higher interest costs. Interest costs increased 13% YoY to Rs 11.1 bn from Rs 9.9 bn a year ago.
Last on our list is Mphasis.
Mphasis a global IT solutions provider specializing in cloud and cognitive services.
Shares of Mphasis are down 32.2% in 2022 tracking a decline in IT stocks. As shares of large companies like TCS and Infosys fell, stocks of smaller companies fell as well.
However, the company reported strong results for the June 2022 quarter. It reported an 18.3% YoY increase in net profit on the back of a 26.8% YoY increase in revenue.
The company also maintained its operating profit margin as it kept a tight lid on employee costs.
With a strong outlook and solid fundamentals in place, the long-term view for Mphasis seems bright. The company's total contractual value of new deal wins stood at US$ 302 m in the June 2022 quarter.
The management of the company has said that it continues to stay focused on navigating the current environment with agility while providing margin stability.
Volatility in the market is expected to continue as interest rate hikes by the US Fed in the coming months are expected to keep FII investors on edge.
While such corrections can cause a panic, they also give a buying opportunity for long term investors.
Investors must stay calm amid this storm and use this as an opportunity to invest in quality companies for the long term.
If you plan to invest, assess the fundamentals and prospects of the business. Sustained research must not be compromised despite the positive odds.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)