Domestic cyclicals take mkt to new peaks, Nifty tops previous all-time high

Capital goods, FMCG and auto gain the most since December 1

The latest up move in the market has been led by domestic cyclicals with stocks in sectors such as capital goods, PSU banks, fast moving consumer goods (FMCG) and automobiles outperforming. While media, IT and healthcare lagging.

An analysis of performance of Nifty 50 components since December 1 shows FMCG and automobile companies gaining the most. On the other hand, Infosys and Reliance Industries (RIL) have been the biggest drags.

The benchmark Nifty 50 index on Friday surpassed the previous lifetime closing high of 18,813. The index closed at 18,826 on Friday. It took the index 134 trading sessions to top the previous high. During this time, the Nifty fell as much as 10 per cent to 16,945 on March 23.

While the index went back to pretty much the same levels that it was on December 1, many of its components have moved in different directions. At present, 15 of them are still below the levels seen during the previous highs. The biggest losers since December 1 are Adani Enterprises (down 36 per cent), Infosys (-22 per cent) and Adani Ports & SEZ (-16 per cent). However, Infosys—thanks to its high weight in the index—has been the biggest drag followed by RIL. The IT major has made a negative contribution of 268 points since December 1, while RIL shaved off 123 points, although it is down just 5 per cent. Adani has made an 87-point negative contribution despite its sharp fall.

Meanwhile, ITC has pushed up the Nifty by 253 points. Other large contributors have been Larsen & Toubro (80 points), Tata Motors (52 points) and Axis Bank (50 points).

Nifty’s valuations at present are below that of December 2022 levels thanks to expansion in earnings. The Nifty trades at 19.9 times its projected 12-month forward earnings, lower compared to 21x in December.

“Nifty-50 valuations based on both one-year forward earnings and trailing earnings are rich but still off the highs achieved in October 2021 and December 2022,” said Motilal Oswal in a note.

Between December and now, the pecking order of top companies too has changed. ITC’s rank has climbed to sixth from 11 in December, while ICICI Bank has moved to four from six. Meanwhile, the ranking of Infosys and HDFC has slipped to seven and nine, respectively.

Also, the broader markets have seen sharper gains this year.

From this year’s low the Nifty has risen 10 per cent but the midcaps and smallcaps indices have rebounded close to 20 per cent each.