Current rally more broad-based, feel brokers

The stock market is not getting polarised as is usually the case given the nearly three-year-old rally, feel brokers.

Currently, the top 100 stocks account for only 79 per cent of the turnover on the National Stock Exchange. At the peak of the technology frenzy in March 2001, top 100 stocks accounted for 97 per cent of the total turnover.

"The current rally has been widespread and encompasses more companies compared with the previous market rallies. Many small stocks have grown into medium and large cap stocks owing to the stupendous rise in the market over the past three years. Since the list of worthy investment candidates gets longer, the market activity is also broad-based." points out Vivek Mahajan, chief dealer at IL & FS Securities.

The concentration in top stocks has been systematically declining since the market burst in 2001. Top 25 stocks, which accounted for 89 per cent of turnover on the bourses, now contribute only 44 per cent to the total turnover. At present top 10 stocks contribute to 27 per cent of the turnover against 73 per cent in 2001.

At the peaks, rallies are normally dominated by select stocks. Market players normally pull back funds from smaller stocks and hold positions in sure-shot winners.

But this time the northward march is more confident and broad-based even after three consecutive years of high powered returns.

Experts interpret the rise in concentration as one of the vital signs of market peaking. That the market rally is still broad-based lends longevity to the rally, brokers said.

Pankaj Karde of India Infoline says, "Substantial liquidity and rise in the number of market participants have increased the overall volumes in the markets.

A number of small cap and mid-cap companies have recorded better than expected operational performance and these stocks have given spectacular returns.