Mumbai : Sensex re-touched the psychologically-important 60,000 mark on Monday on the back of recent optimism in Indian stock markets, taking the headline index closer to its last year’s peak. However, despite strong macroeconomic conditions, strong corporate earnings and weak global cues, an improved rain-driven rally does not appear to be broad-based and is confined to large-cap stocks.
The 30-share blue-chip index has mostly caught up with the October 2021 high and is down only 3.4% from that level as of the close of trading on Monday. However, in the universe of BSE-listed stocks, only a handful (6.7%) have outperformed, a Mint analysis showed. Large-cap stocks accounted for 23.5%, while mid-cap and small-cap stocks accounted for 16.2% and 5.7%, respectively.
This suggests that the recovery is driven by less-volatile large-caps.
Thus, over 93% of the stocks on BSE are still down over 3.4% since their respective 52-year peak. Overall, about 16% of the stock is below its share price by more than half of its previous peak. Only 5% of the stocks analyzed are within 4% of their all-time high, of which more than two-thirds are small-cap.
The analysis covered 3,176 companies listed on the BSE, with companies accounting for the top 70% of the total market capitalization classified as large-cap, the next 15% as mid-cap and the bottom 15%. Classified as small-cap.
A segment-wise analysis showed that 7% of large-cap stocks are less than 1% shy of reclaiming their one-year highs. About 79% closed up 25% from their one-year highs on Monday, while 20% were down 25-50% from their previous highs. The share of mid-caps and small-caps that are trading 25-50% below their 52-week highs stands at 30% and 40%, respectively.
Small-cap firms close to 17% are not even half their one-year peak, while 23 small-cap stocks closed at their 52-week highs on Monday.
Vishal Wagh, Head of Research, Bonanza Portfolio, said, “The current rally is a bear market pullback that has been observed all over the world. By nature, bear market rallies are only frontline and large and mid-cap leads. There is wide participation in such scenarios. Normally absent,” Wagh said.
On average, there is less to catch up in sectors like auto and ancillary and hospitality. They are down about 16% from their 52-week highs. On the other hand, companies still have some way to go in the textile segment and the information technology space, which is trading more than 30% below its peak.
“The rally is mostly led by new key sectors such as defence, older sectors such as auto, and fast-growing consumer goods and consumption sectors,” Wagh said.
Earlier, markets had swung on risk-averse sentiments in June, but resilient economic activity and steady foreign inflows of late have supported the domestic markets.
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