IT sector outperforms the broad surge

The current stock market rally has been one of the broadest ever, if not the broadest, traversing through almost all sectors.

As a result, overall market capitalisation has zoomed past what was seen when the Sensex had peaked previously on January 14, 2004.

Nandan Chakraborty, head of research at Enam Securities, said, "The last one year has seen an almost uniform growth in most sectors. Liquidity has been a key driver but there is a strong growth story too, apart from other dynamics. The depreciation of the dollar has led to the torrential flow of funds into emerging markets, including India."

Hemang Raja, managing director and CEO of IL&FS Investmart, believes good valuations have attracted foreign inflows so far. "Going ahead, we will continue to see buying at all lower levels after corrections," he said.

Almost all sectors have attracted buying interest, but going ahead we may see certain segments getting more attention and valuations and growth potential from hereon will play a significant role, according to analysts.

The information technology (IT) sector has outshone all other sectors in the current rally.

Among sectoral indices, the Bombay Stock Exchange's IT index has shown gains in the period between January 14 and November 30, 2004, at 26.65 per cent.

The strong price appreciation in information technology scrips has boosted the sectors' market capitalisation from Rs 1,37,911 crore on January 14, 2004 to Rs 1,67,185 crore on November 30.

As a result, the sector's rank in the market capitalisation leagues has moved up a notch from three at the time of the January 14 peak to two now. Vijay Saraf, chief operating officer at Centrum Securities, said, "IT will keep attracting attention as global outsourcing increases. Sectors such as cement and steel will also grow on the back of infrastructure development that will drive them."

He said domestic consumption and growth coupled with global demand will help most sectors post decent gains down the road. Indeed, the IT sector seemed to have swapped places with the banking sector, which was the darling of the January rally.

Though the banking sector's market capitalisation has inched up from Rs 1,39,497 crore to Rs 1,40,006 crore , in line with the overall upturn, it has still fallen to the third position in the valuation league table.

The BSE Bankex has gained just 4.86 per cent in the period in which the Sensex has just reverted to the January 14 levels.

Enam's Chakraborty feels banking scrips remain undervalued despite the recent rise.

In the sectoral market capitalisation rankings, the refinery sector still tops the charts with a valuation of Rs 2,07,017 crore as on November 30, though the 11 per cent drop in the BSE Oil & Gas index has knocked down the sector's capitalisation from Rs 2,28,726 crore seen on January 14.

Diversified companies come at number 4 with a capitalisation of Rs 97,573 crore, followed by the pharmaceuticals sector with Rs 94,304 crore. Both segments have managed to hold on to their positions as on January 14.

A 10 per cent drop in the BSE FMCG index over the period pushed the sector from the sixth position (Rs 60,058 crore capitalisation) to the seventh slot with a capitalisation of Rs 46,013 crore.

Its place was taken over by the telecommunication sector which moved up a level to six. It's market capitalisation stands at Rs 53, 794 crore currently.

The steel sector stood eighth despite an increase in market capitalisation from Rs 40,873 crore to Rs 44,656 crore.

"While the commodities sector could see a short-term dip amid volatility, growing global demand for commodities should keep the sector buoyant in the next few years," an analyst with a foreign brokerage said.

Cigarettes and power companies swapped ranks between the ninth and tenth places.

While the cigarette sector moved up from to ninth, the power sector slipped to the tenth slot.