Though both Sensex and Nifty are at record highs, most
retail investors are feeling left out as a large number
of stocks have not participated in this rally. Rex
Mathew explains why
by strong inflows from overseas investors, domestic stock
market indices have surged ahead over the last few months
and are setting new lifetime highs almost every day. Strong
economic growth, expected to exceed 8.5 per cent for the
current financial year, would sustain the excellent corporate
performance next year as well.
Sensex took just 26 trading sessions to move from 13000
to 14000 and the Nifty has conquered 4000. Sensex has
gained nearly 6 per cent over the last one month, mostly
led by banking, capital goods and technology stocks. Among
the sectoral indices on the BSE, the bank index has been
the best performer with gains of close to 10 per cent
over the last one month or so. BSE capital goods and BSE
IT indices also did well during this period.
was the best performer in the rally from 13000 to 14000,
with gains of over 20 per cent. Telecom stocks Bharti
and Reliance Communications gained between 16 and 18 per
cent each. Cement stocks also had a good time as ACC rallied
almost 19 per cent and Gujarat Ambuja gained over 9 per
market capitalisation of all listed Indian companies now
stands at a staggering Rs36.4 lakh crore, higher than
last financial year's GDP of Rs32 lakh crore at current
a market capitalisation of around $820 billion, India
now ranks fourth among the largest stock markets in the
Asia-Pacific region. Japan leads the region with a market
cap of over $4 trillion, followed by Hong Kong and Australia.
India is followed by South Korea at the fifth position.
With some high profile IPO's like DLF, Cairn India and
Idea Cellular which would have a combined market
value in excess of $30 billion in the pipeline,
India would extend its lead in market cap over South Korea
by early next year.
major global markets, India has been only the 4th best
performing market over the last month and the worst among
the BRIC (Brazil, Russia, India and China) economies.
Shanghai has been the best performer with returns in excess
of 16 per cent followed by Russia, which gained nearly
9 per cent. Brazil gained nearly 8 per cent during this
a large section of retail investors have not benefited
from this rally. The up move has been very selective and
has bypassed many stocks, especially in the mid-cap and
small-cap spaces. Retail investors are still stuck in
positions built before the May 2006 slump.
Mid-caps are yet to regain the heights scaled in May this
year and many stocks continue to trade with significant
discounts from the levels seen earlier this year. The
CNX Mid-cap Index is still around 200 points below its
lifetime high of 5350 touched in May 2006. A large number
of the 100 stocks, which form this index, are still trading
below their May levels.
BSE Mid-cap index has gained only around 4 per cent over
the last one month and is more than 300 points below its
lifetime high. On the BSE Mid-cap Index, more than 60
per cent of the stocks, which are part of the index, are
trading below their May levels and only about 25 per cent
have given decent returns in excess of 10 per cent.
situation is even worse in the small cap space. The BSE
Small-cap index has gained only about 3 per cent in the
last one month and is more than 1,100 points, or nearly
14 per cent, below its lifetime high set in May 2006.
More than 70 per cent of the stocks forming the BSE Small-cap
index are trading below their May levels and only about
15 per cent have given returns of more than 10 per cent
in this period.
reasons for this underperformance are pretty simple and
straightforward. Excellent performance by the larger companies
has led to a shift in investor interest away from mid-caps
and small-caps in recent months. Some of the mid-caps
have failed to deliver and foreign investors have lost
heavily in a few of them. When the large caps offer such
excellent growth at far lower risk levels, it is only
natural that investors started focussing on large caps.
the mid-caps, those who have performed well are stocks
of companies who have very ambitious plans and those who
have the potential to grow much larger. Some of the real
estate plays, construction companies and financial services
companies are examples. Stocks of select companies, which
are in virgin markets have also benefited considerably.
situation may change once the large caps seek higher valuations,
which may make some investors uncomfortable. There are
a large number of companies in the mid-cap and small-cap
universe, which have the potential to deliver excellent
growth rates over the next many years and emerge as globally
competitive entities. Such ideas would definitely attract
a lot of investor interest as always.
importantly, this bull run is not a result of any 'irrational
exuberance' the term coined by former US Fed chairman
Alan Greenspan nearly a decade ago to warn against the
excesses of the last technology-led rally. This up trend
is backed by strong corporate performance, which looks
sustainable over a longer term, though there are select
pockets where some froth is building up.
number of companies, which enjoy market valuations in
excess of a billion dollars continues to increase. Five
companies, Reliance Petroleum, Tech Mahindra, GMR Infrastructure,
Parsvnath and Lanco, which have come out with new issues
over the last six months have joined the club, taking
the total to 131.
dominate the billionaires' club followed by technology
services. The country's emergence as a very competitive
manufacturer of generic drugs has resulted in as many
as eight pharma companies enjoying valuations of a billion
dollar or more. The frenzy in the real estate sector has
lifted an equal number of property stocks to the billion-dollar
companies in the oil and gas space occupy top spots in
individual valuations, only six companies from the sector
are included in the league of billionaires. Six companies
from the auto space, both 4-wheelers and 2-wheelers, appear
in the list. As four of the larger telecom companies
BSNL, Hutch, Idea and Tata Tele are as yet unlisted,
only four telecom service providers find themselves in
Industries captured the 'most valuable' company crown
from ONGC for a brief period, but the PSU oil behemoth
easily won it back with ease. ONGC now commands a market
value of Rs183,333 crore or $41.2 billion, which is still
nearly $6 billion short of its peak value touched in May
this year. Reliance Industries follows with a market cap
of $40.01 billion.
and NTPC are fighting it out for the third place. As of
yesterday, Infosys has a modest lead with a market cap
of $27.96 billion while NTPC comes in 4th with a market
cap of $27.73 billion. Bharti Airtel has seen a spectacular
rally over the last 6 months and is 5th on the list with
value of $27.21 billion.
has also done well to lift its market value to $26.14
billion, the last one with a market cap of over Rs1 lakh
crore, and occupies
the 6th slot. Reliance Communications, Wipro Limited,
ICICI Bank and ITC complete the top-10 in terms of market
also see : Other
reports by Rex Mathew