Capital-Intensive, Cyclical, Value Stocks To Outperform After Decadal Underperformance: ICICI Securities
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ICICI Securities Report
In a departure from trends seen over the past decade, factors such as ‘high capital intensity’ (operating asset turnover), ‘low asset valuation’ (or low price/book) and ‘high financial leverage’ have driven stock price outperformance within the BSE200 universe over FY21 and the same is now continuing into FY22 as well.
Expressed in terms of sectors, the outperformance since March 2020 is led by cyclicals and capital intensive businesses – metals, real estate, power, auto and consumer durables while IT although a defensive and asset light sector outperformed on the expectations of cyclical growth emerging from digitalisation.
On the basis of style, outperformance is driven by high beta, smaller size and value while underperformance driven by low volatility and growth.
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