Nifty: Heavyweights lag, but new leaders give wings to rally

Mumbai: The dynamics of stock leadership on Dalal Street has undergone a change of late with stalwarts of the recent past taking a backseat and giving way to new stars. Gone are the days when bluechip consumer, private financials and information technology (IT) dominated the performance of the Nifty for nearly a decade. Now, the baton has been passed on to public sector companies including banks, auto, cement and pharma stocks, which have spearheaded the index’s up-move in the past couple of years.

Shares of some of India’s best companies – HDFC Bank, Infosys, Asian Paints, Bajaj Finance, HDFC Life and Hindalco – among a dozen stocks on the 50-stock Nifty have declined in the last two years as the NSE’s benchmark index returned over 28% during this period. Another half a dozen stocks, including TCS, Hindustan Unilever, Tata Steel, and Grasim, are up but have underperformed the Nifty in the previous two years.

“The leadership of the rally does change depending upon macro conditions and developments in a particular stock or sector,” said Gaurav Dua, head of capital market strategy, Sharekhan. “That’s the reason why many successful asset managers give importance to top-down analysis and not focus purely on bottom-up stock picks to manage portfolios.”

Analysts said the valuations of many of the private banks, IT, financials and consumer companies had become expensive, while the current winners, which had been laggards so far, were cheaply valued. This resulted in rotation of money into cheaper sectors from the popular ones that were trading at rich valuations.

Analysts said chasing a stock just because it has been a winner for the past few years may not be a good strategy.

“Investors are advised not to concentrate all their investments in stocks that led the market for many years, as the dynamics of leadership are shifting,” said Sunil Nyati, MD, Swastika Investmart. “Diversification across sectors and considering emerging leaders can be prudent strategies in this evolving market landscape.Some banking stocks, including SBI, ICICI, and Axis, have outperformed in this period, while HDFC and Kotak have underperformed due to a bottom-up approach.

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