Worst Performing Nifty 50 Stocks of FY24. Could it Get Worse Before It Gets Better?

In FY24, benchmark indices Nifty 50 and Sensex 30 registered 28% and 25% gains, respectively.

Among prominent names, the best performing stocks were Tata Motors, Bajaj Auto, and Adani Ports with gains of over 100%.

Meanwhile, there were only three losers in the year gone by. All the other constituents from these indexes posted gains.

As we move on to a new financial year, there's a consensus that the lead up to general elections could have some serious implications and investors should be prepared to handle the volatility.

In today's article, we'll look at the three worst performing stocks of Nifty 50 and what lies ahead for them.

#1 UPL Ltd.

First on the list is UPL Ltd.

UPL Limited, formerly United Phosphorous Limited, is an Indian multinational company.

The company was founded in 1976 with a history of global expansion with the acquisition of MTM agrochemical in the UK in 1996.

It specializes in agrochemicals, industrial chemicals, intermediates, and speciality chemicals intermediates. UPL also has a focus on sustainable agriculture solutions.

In the past one year, UPL shares have declined by 35%.

UPL recorded a net loss of Rs 12.2 bn (bn) in the quarter ended December 2023, which deviated from the previous quarter's net profit of Rs 10.8 bn.

The company's Q3 results fell below expectations due to factors such as price erosion, rebates, and high-cost raw material inventory.

Market experts also project that the outlook is challenging given the plunge in earnings before interest, taxes, depreciation, and amortization (EBITDA).

However, we believe this is expected to be temporary. The management is optimistic about a progressively improved performance in the fourth quarter of FY24 and the first quarter of FY25.

It expects a normalised business performance from the second quarter of FY25. Its foremost priority is reducing debt.

UPL also has a pipeline of products worth US$ 8.5 bn across various stages of development and catering to different regions and crop combinations.

Based on the pipeline, it is confident of increasing its innovation rate from 14% to 24% by FY27 and achieving a 50% revenue contribution from differentiated and sustainable products within this timeframe.

To know more, check out UPL's financial factsheet and latest quarterly results.

#2 Hindustan Unilever (HUL)

Second on this list is Hindustan Unilever Ltd (HUL).

HUL is India's largest consumer products marketer, which operates as a subsidiary of Unilever. The company was established in 1931 with a historic tie dating back to the 1880s.

HUL is recognized for its strong ESG performance in India's FMCG sector and as a top employer.

Over the years, HUL expanded through acquisitions such as integration with subsidiaries of the Tata Group. The shakti project by HUL promotes rural employment and enjoys sales nationwide.

In FY24, HUL share price declined by around 11%. Despite a stronghold in the market, the stock price has been volatile in the past year.

The primary reason behind the current fall is due to the FMCG major posting disappointing numbers in its Q3 earnings.

HUL recorded a net profit growth of marginal 0.6% year-on-year (YoY) to Rs 25.2 bn. Revenue from operations decreased by 0.3% YoY to Rs 151.8 bn, below the estimate of Rs 155.3 bn.

Apart from that, increasing price of palm oil along with the robust performance of competing oils, have affected shares of the company as it uses palm oil as a key raw material for its body wash and few food products.

On the other hand, FMCG stocks are also underperforming due to macroeconomic changes affecting consumer spending, inflation rising operational costs, and regulatory shifts targeting sectors like tobacco.

To overcome challenges, HUL has recently announced a collaboration with the Andhra Pradesh government for palm oil production at investments exceeding Rs 3 bn. Localising palm oil production can potentially give the company enhanced cost efficiencies, lower forex volatility, and a more secure supply chain.

HUL also announced a partnership in March 2024 with the Tea Research Association to address the challenges in the tea industry.

While the stock could experience pressure in the near term, in the long term it is expected to witness a recovery in both pricing and volume growth.

In a competitive landscape featuring multinational, domestic, and regional FMCG firms, HUL holds either the top spot or a strong second position in most categories it operates.

Its portfolio targets various market segments, including premium, mid-price, and economy, setting it apart from competitors focused solely on premium or mass markets.

To know more about the company, check out the financial factsheet and the latest quarterly results.

#3 HDFC Bank Ltd.

Third on this list is HDFC Bank Ltd.

HDFC Bank was incorporated in August 1994, which offers personal and corporate banking service

In FY24, HDFC Bank share price has declined around 10% owing to a confluence of factors.

Analysts have expressed concerns over the bank's net interest margins (NIMs), which have contracted post-merger, coupled with a cautious outlook on the bank's liability structure.

Moreover, the broader market trends after Q3F24 results have exerted downward pressure on the stock. The drop in HDFC Bank's stock price is mainly due to concerns about its profit margins and changes in its financial structure after merging with HDFC Ltd.

The private lender recently missed its net interest margins (NIM) target due to increased fund costs, elevated provisions, and a decade-low growth in earnings per share (EPS) in Q3.

However, HDFC Bank is known for its strong reputation and wide range of products. And we all know that you can't keep a good player down for so long... sooner or later, HDFC Bank shares could stage a big rebound.

The bank's strong franchise, the huge synergies post the merger and the long runway for growth, makes it a good stock to keep on your watchlist.

HDFC Bank, with its esteemed brand and extensive product offerings, aims to expand its reach by opening an additional 1,000 branches in 2024.

This expansion is projected to bring the total to around 13,000 branches within the next 3 to 5 years, further solidifying its presence in the banking sector.

To know more about the bank, check out its HDFC Bank financial factsheet and latest financial results.

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In Conclusion

While the three stocks that we discussed above faced some serious challenges in the year gone by, all of them are strong contenders for a BIG rebound.

Also, if at all in any case there's more turbulence in the smallcap space like the recent smallcap meltdown, these largecap companies could show resilience.

Nevertheless, it's crucial for investors to conduct thorough due diligence, considering factors such as valuation, industry trends, and macroeconomic indicators.

All in all, with the general elections right around the corner, be prepared for some additional volatility as we all have to make sacrifices during an election year!

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...