| |
| A comparison of the gamut of Indian indices is called for after a whopper of a rally that we have witnessed in the last few months.
|
| |
| Benchmark indices like the Sensex and the Nifty have shown identical growth trajectories in the last six months and year. The Sensex grew by 57 per cent while the Nifty grew by 54 per cent on an yearly basis.
|
| |
| But here's the punchline - both indices actually showed higher gains in the last six months (58 per cent and 59 per cent respectively). Market pundits say that the broad-based nature of the upmove is the comfort factor in this rally with all sectors showing growth.
|
| |
| "The Sensex was hugely underpriced at 3000 and the rally to 3900-4000 was on account of genuine buying," says Rajiv Sampath, director of broking and research firm Parag Parikh.
|
| |
| "FIIs have also got their act together and the sparkling corporate performance can only mean more good things ahead for the index," adds Sampat.
|
| |
| The positivity emanating from factors like strong FII inflows, rupee appreciation, economic revival, good monsoons and glittering corporate results have seen all major indices rack up humungous gains, especially in the last six months.
|
| |
| Leading the way was the BSE Capital Goods Index which grew by a whopping 139.18 per cent on a year-on-year basis and 69 per cent in the last six months.
|
| |
| The capital goods sector has been viewed very favourably by analysts due to the pick up in the economy and the huge increase in scale that has taken place in Indian industries on the whole.
|
| |
| They feel that the bulk of the gains have come about due to the ramping up of capacities across sectors with more companies looking to benchmark themselves with their international peers, which has spurred demand.
|
| |
| While most players expect the sector to remain buoyant with the favourable economic environment working to their advantage, there are some voices of dissent.
|
| |
| "The sector on the whole is looking fairly valued and some stocks like Bhel, Alstom Power and KEC are looking overvalued," says an analyst from a leading brokerage.
|
| |
| The CNX Mid Cap was next with a 110.12 per cent on a year-on-year basis and 75.81 per cent in the last six months. Hardly anyone would be surprised by that, especially since mid-caps have actually outperformed large-cap stocks in the rally.
|
| |
| Not only that, the base of the rally has been sound with market data showing that mid-caps had started rallying relatively earlier in the first week of April compared to mid-May for large-cap stocks.
|
| |
| Going forward, although players feel that the addition of a few mid-caps would boost portfolio performance, investors need to be very choosy in selecting mid-caps from now because of the swell in their valuations from the rally.
|
| |
| The BSE PSU Index was also a good performer, recording a 109 per cent gain on a year-on-year basis and 65 per cent in the last six months.
|
| |
| Although the year-on-year and six-month performance has been sparkling, the index has underperformed in the three months with a below par 12.4 per cent growth.
|
| |
| "PSUs have witnessed a lot of see-saw moments this year with the disinvestment rumours being denied time and again, the loss from which has been borne by investors," says a prominent market player.
|
| |
| However, Sampat feels that PSUs make for good dividend yield plays. "The huge dividend doled out by PSU stalwarts like ONGC, HPCL and the like make for a decent tax free yield of 8-10 per cent which presents a great opportunity," adds Sampat.
|
| |
| Moreover, he feels that divestment is imminent and postponement would only worsen matters and decrease the value of the assets further as was the case with VSNL.
|
| |
| The BSE Healthcare Index rose 80.43 per cent on a year-on-year basis and 70.10 per cent in the last six months.
|
| |
| "We really like the pharma story which is going through a transformation. The emphasis would shift to preventive products rather than the actual cure and we are positive on the long-term outlook for the sector," says Sampat.
|
| |
| However, Sandeep Shenoy, head of equity desk at brokerage and research firm Pioneer Intermediaries, begs to differ, "The healthcare sector had been hyped up a bit too much with the outsourcing angle thrown in and that is reflecting on the valuations. However, I feel that the sector has topped out and investors in the sector may end up on the losing side," he adds.
|
| |
| IT indices like the BSE TECk and BSEIT have shown maximum growth in the last six months.
|
| |
| In fact, these indices are among the biggest gainers if you look at the upsides across sectors in the last three months. Analysts put this as an effect of the late blooming that the sector witnessed in the rally. Players are, however, divided on the future prospects of the sector.
|
| |
| "The sector on the whole had been browbeat for a long time and the worst seems to be over for the sector," feels Shenoy.
|
| |
| Shenoy expects the IT sector to outperform in the near term as pricing pressure has eased and volumes have picked up. He feels that large software firms should lead the rest of the sector in performance.
|
| |
| However, others are not so sure. "We don't subscribe to the idea of a recovery in the IT sector," says an analyst from a leading brokerage.
|
| |
| "Although the overall business climate has improved, we don't expect the momentum to continue for the sector looking at the margins and currency scenario, especially with major companies which have run up substantially," he adds.
|
| |
| A notable aberration has been seen in the FMCG Index. The BSE FMCG Index has underperformed in the last six months and year, growing only by around 25 per cent. The sector has also risen the least - a measly 2 per cent in the last three months.
|
| |
| "The performance of the FMCG index is not surprising to say the least given the fact that market capitalisation is highly lopsided in favour of bellwethers HLL, ITC and Nestle," says Jamshed Desai, head of research at Taib Securities.
|
| |
| Desai feels that with the exception of ITC, the other two biggies have underperformed and have made the overall numbers look bleak.
|
| |
| However, Desai does not write off the sector saying that select pockets of FMCG companies have done well and investors could make money if they select the right stock.
|
| |
| He says though Nestle has not performed so far, the stock has upside potential. He is also positive on Godrej Consumer, P&G and Dabur.
|
| |
| With large-caps making the most of the rally, the moot question is whether they still have scope to attract more investment. The verdict is unanimous this time. Market players are positive on India Inc and expect the top companies to continue generating wealth.
|
| |
| Reaffirms Sampat, "The long-term outlook is bullish and we can safely say that the markets should be able to generate returns of 20 per cent in the next few years." The optimism stems from the economic upturn and players appear convinced that the rally is genuine this time around. |
| |
