Sensex rallies 12% in Samvat 2075; mid, small-caps underperform

Weak consumption demand in the economy, vacillating trade negotiations between the United States and China, tensions in the gulf region, proposal of taxation on foreign portfolio investors (FPIs) under Budget 2019, abysmal corporate earnings and geo-political tensions between India and Pakistan post abrogation of Article 370 in Jammu & Kashmir were among the key factors that impacted sentiment at the bourses in Samvat 2075.

Still, bulls wouldn’t forget September 20 – the day when the S&P BSE Sensex vaulted over 2,000 points intra-day when government cut the corporation tax rate from 35 per cent to an effective 25.2 per cent. Another eventful day, June 3, when the S&P BSE Sensex scaled life-time high and hit the 40,000 mark for the first time ever post the re-election of the Narendra Modi-led BJP government for the second consecutive term.

During Samvat 2075 (till October 18), the headline S&P BSE Sensex advanced 11.5 per cent, while the broader Nifty50 index has moved up nearly 10 per cent. The broader markets, however, underperformed with the S&P BSE Mid-cap index slipping 3 per cent (Nifty mid-cap index slipped 7 per cent). The S&P BSE small-cap, too, tumbled 10 per cent (Nifty Small-cap index down 11 per cent). 

“Samvat 2075 has been a tough year for the equity markets by any standards, except when looked through the prism of headline index. This was one of the most divergent years as far as performance differential between indices is concerned. Even the large cap index (Nifty) was marked by concentrated performance with top 10 performers accounting for majority of the gains,” says Vivek Mahajan, head of research at Aditya Birla Capital. 

GAINERS AND LOSERS

With mounting fears of a global recessions and China, mostly, at the receiving end of the trade war, metal stocks were the hardest hit in the previous year. Commodity prices, typically adjusted basis of global demand, were hit as the world’s biggest consumption market faced slowdown. Accordingly, Nifty Metal Index underperformed the benchmark indices and slumped 29 per cent during the period under review.

Steel Authority of India (down 46 per cent), Jindal steel and Power (down 41 per cent), Tata Steel and National Aluminium Company (down 38 per cent each) were the top laggards on the index, while only APl Apollo Tubes (up 12 per cent) and Ratnamani Metals and Tubes (up 5 per cent) gained. Others that lost ground were the Nifty PSU Bank and Nifty Pharma indices.

With major corporate like DHFL, Cox & Kings, Jet Airways, Reliance Capital, Jain Irrigation and Altico Capital either defaulting on interest payments or filing for resolution, confidence in public sector banks (PSBs) was shaken. Nifty PSU Bank index slid 24 per cent on fears of PSBs facing more non-performing assets (NPAs).

“Samvat 2075 has seen more corporate misgovernances come to light and will actually go down as a year of cleansing for corporate India,” Mahajan adds.

As for pharmaceutical firms, rising inspections by US food and drug administration (US FDA) on Indian plants have sent the index down 22 per cent in Samvat 2075.

Besides, Nifty Auto index witnessed a fall of 14 per cent in Samvat 2075. Indian automobile sector is facing its longest ever streak of sales decline. Passenger vehicle sales slumped 23.7 per cent in September, the eleventh straight month of decline, data by industry body Society of Indian Automobile Manufacturers (SIAM) showed. Passenger vehicle sales dropped to 223,317 units in September, while passenger car sales dived 33.4 per cent to 131,281 units. 

On the upside, Nifty Realty and Nifty Energy indices have fared better than the benchmarks. The former index has advanced 16 per cent since last Diwali, with constituents like Brigade Enterprises (up 65 per cent), Godrej Properties (up 58 per cent), and Prestige Estate Projects (up 56 per cent) surging the most.