Some unlikely leaders have emerged in the latest Sensex rally. In the past couple of months, between February 24 and April 21, the benchmark index has gained 1,970 points or 11 per cent. During this period, Jaiprakash Associates Ltd, hitherto an underperformer, and ITC Ltd, long considered a defensive play, followed by the rate-sensitive automobile stocks, have emerged as the unlikely leaders of the rally.
Traditional drivers such as the two Reliance groups and information technology majors are in no mood to take the front seat, say analysts. Both the Reliance groups (Mukesh Ambani’s Reliance Industries has about 10 per cent weightage in the Sensex and the Anil Ambani group’s firms together have about half this much) and IT stocks have underperformed the Sensex during this period.
Analysts feel the Anil Ambani group is likely to continue its underperformance, as there is no clear guidance from management in terms of gas production numbers. This group's bad times may be over with the arrest of its key officials in the telecom scam. Reliance Communications bettered the Sensex returns at 14 per cent, while Reliance Infrastructure (both are part of the Anil Ambani group) was among the worst performers in the rally, at four per cent.
Ajay Pandey, vice president, Intime Spectrum Securities Ltd, also feels Reliance Industries (RIL) will continue to underperform. “Lack of data is keeping both analysts and sales staff at brokerages from recommending Reliance. This has become a boon for other stocks,” he said.
| SENSEX SCORECARD | |||
| Best performers | 21 Apr, 2011 | 24 Feb, 2011 | %chg |
| Jaiprakash Associates | 101.70 | 78.70 | 29.22 |
| ITC | 190.10 | 151.60 | 25.40 |
| Mahindra & Mahindra | 766.15 | 615.90 | 24.40 |
| Hero Honda | 1,786.05 | 1,490.45 | 19.83 |
| Tata Motors | 1,243.84 | 1,058.25 | 17.54 |
| Worst performers | |||
| Infosys Technologies | 2,909.25 | 3,025.40 | -3.84 |
| BHEL | 2,057.50 | 1,999.60 | 2.90 |
| Hindustan Unilever | 288.80 | 280.20 | 3.07 |
| Reliance Infrastructure | 696.00 | 668.65 | 4.09 |
| Tata Steel | 628.75 | 602.15 | 4.42 |
| Data compiled by BS Research Bureau | |||
Sailav Kaji, director-institutional equities & chief strategist, Padmakshi Financial Services Ltd, said bulls and bears were in a dilemma over the RIL stock due to lack of clear direction. “There is no consistency in RIL numbers. This is putting investors off. But at Rs 1,000-levels, the stock looks good in a long-term perspective,” Kaji added. According to him, infrastructure and cement companies will benefit from the increase in government order flow. And, that the rally in auto was likely to slow down. “After the sharp pick up, they are likely to consolidate. Not much upside in the next leg.”
GAINS
Business Standard Research Bureau data shows Jaiprakash Associates Ltd, which had been a laggard for the past couple of years and was battered in the earlier correction, has led the rally with gains of 28 per cent. ITC Ltd, the diversified player with interest in fast-moving consumer goods, retail and tobacco, often considered a defensive play by investors, is the second best performer with a gain of 25 per cent in two months. ITC has contributed 260 points to the rally, accounting for 13 per cent of the total gains made by the index. ITC's gains are attributed to the absence of any major tax hike on tobacco in the budget.
Auto companies Mahindra & Mahindra (24.4 per cent), Hero Honda (19.8 per cent) and Tata Motors (17.5 per cent) complete the top five list of the rally. Infosys, after its nine per cent fall in a single session last week, ended as the only Sensex stock with negative returns in the index run. Infy has lost four per cent since the rally began. The outlook for the stock (as well as its technology sector peers TCS and Wipro), continues to be bad, following the moderate expectations the management spelt out for the period ahead while announcing its results last week.
Analysts say while JP has gained from expectation of government order flow, the auto companies did so from reallocation by investors after Maruti Suzuki said it would increase royalty payments to Japanese partner Suzuki Ltd. Maruti gained much less than the other auto companies in the rally, at about eight per cent.
Kaji said there is positive momentum in the market. “We may see the Nifty stabilising around 5,700-6,000 levels.” This will correspond to Sensex levels of 20,000.
