The equity market funnel has become narrower than the pre-Covid-19 period. Three large-cap stocks — Reliance Industries, Infosys and Hindustan Unilever — accounted for nearly 51 per cent of the rise in the Sensex, from its 52-week low on March 23.
This is nearly twice these companies’ combined weightage of around 27 per cent in the index.
The combined market capitalisation of index companies has risen 23 per cent since March 23, against a 49 per cent rise in m-cap of these three contributors.
In all, these three entities have added Rs 5.8 trillion to their m-cap during the period, against a Rs 11.3-trillion rise in the incremental m-cap of all 30 Sensex companies.
Together with HDFC Bank and Bharti Airtel, the top five stocks accounted for nearly two-thirds (65 per cent) of the incremental rise in the index value, since its 52-week low. The top 10 stocks accounted for 83 per cent of the rise in the market, during the period.
Analysts attribute this to the Covid-19 led disruption. “There has been a rally in sectors that are likely to be least affected by the lockdown — telecom, crude oil refining, banking, FMCG, pharma, and technology firms — while others continue to languish,” says G Chokkalingam, founder and MD of Equinomics Research & Advisory Services.
A stock contribution to the index is based on the firm’s free-float (non-promoter stake) m-cap, leading to a gap between the movement in market capitalisation and their contribution to index movement.
As such, a firm with higher free float or non-promoter stake (like Infosys) will have a greater impact on the index, than a stock with lower free-float (like Tata Consultancy Services).
RIL has been the single-largest market mover in the last one-and-a-half months, accounting for nearly a third of the rise in the broader market since March 23.
Its m-cap has risen 77 per cent during the period, which makes it the top performing index stock for the period.
Infosys is the second-largest contributor, accounting for nearly 9 per cent of the incremental rise in the index. The stock rose 28 per cent during the period. It was followed by HUL, which accounted for 8.5 per cent of the rise.
The HUL stock rose 21 per cent. HDFC Bank, on the other hand, contributed 8.3 per cent to the incremental rise in index, with its stock rising 21 per cent; Bharti Airtel followed with a 5.6 per cent contribution to the incremental rise, its stock rising 31 per cent.
Other major contributors include ICICI Bank (5 per cent), Housing Development & Finance Corp (4.4 per cent), and Tata Consultancy Services (3.8 per cent).
At the other end of the spectrum, retail non-bank lender Bajaj Finance has been the biggest laggard (stock down 10.6 per cent), followed by SBI (down 8.2 per cent) and Tata Steel (up 0.6 per cent).