Nearly one-fifth BSE500 stocks slump to 52-week low in June; should you buy?

These stocks, being at year-low, may look cheap but cannot be categorized as value buys as some of them might have been hammered because of weak fundamentals

Despite benchmark indices reaching new heights in early June, the breadth of the market remains weak. This is evident from the fact that almost 20 percent of BSE500 stocks hit their respective 52-week low in June.

Eighty-eight stocks in the BSE500 index hit their respective 52-week low in June, which includes Hindustan Zinc, JSW Steel, Bosch, Motherson Sumi, Vodafone Idea, General Insurance Corp., Lupin, Biocon and YES Bank, among others.

These stocks, being at year-low, may look cheap but cannot be categorized as value buys as some of them might have been hammered because of weak fundamentals, say experts.

“One need not be tempted to consider everything trading at 52-week low as a value play, some of them could well be a value trap,” Shailendra Kumar, Chief Investment Officer at Narnolia Investment Advisors Ltd told Moneycontrol.

“What is needed is to see each company on its own merit and if a quality stock is down due to cyclical issues then that is surely a good buy,” he said.

Overall, more than 900 BSE stocks have hit their 52-week lows so far in June. Most of the stocks are from the broader market.

Most of the mid and smallcaps are economy linked and a slowdown in the economy would hurt the broader market more.

Markets keenly await the budget on July 5 that may help in boosting India's economic growth, which hit a 5-year low for the quarter ended March.

“There has been a sharp slowdown in economic activity post the IL&FS crisis, which is reflected in high-frequency data, viz., IIP and auto sales numbers. GDP growth for Q4FY19 also collapsed to 5.8 percent, much lower than street estimates,” Amar Singh, Head - Advisory Angel Broking Ltd told Moneycontrol.

“The statement from the RBI governor that the Indian economy has been losing traction and needs a decisive monetary policy further dampened the sentiments. However, we expect the government and the RBI to try and stimulate growth through various policy measures in the upcoming budget,” he said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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