Stocks have been mercilessly hammered in the last two-months, that selecting stocks based on fundamentals has become increasingly futile.
It seems all of the money is being deployed in just select 3-4 large cap stocks. It's difficult to understand how DHFL shares can trade at a p/e of just 4 times one year forward earnings.
The company has clarified time and again that the liquidity remains extremely sound, till March 2019 to fulfill all commitments and its portfolio is all retail lending.
Now, the problem has been worries for NBFCs over regulatory tightening for the industry, based on problems at IL&FS. Of course, it is good news for the industry and stocks like DHFL should gain.
Take the case of PC Jeweller. The stock has dropped from Rs 500 levels to Rs 55. The management has clarified that business seems to be doing good and the shares are available at a p/e of 5 times. These stocks are all trading way below book value. Of course, there were transparency issues with PC Jeweller, but, there have been no issues of auditors resigning as in some other cases.
There are so many such examples, where stocks have been beaten down mercilessly, even if there is a simple case of regulatory tightening, which is actually good for these companies. Investors have become extremely sensitive to news. They are willing to just dump some smaller names and take shelter in some of the good quality large cap stocks.
This means the broader markets would have to languish and it seems that they would have to languish for a long period of time.
In the meantime, it is rest for equity research analysts as no amount of fundamental analysis is working, as the broader markets have gone for a toss.