Despite the Nifty50 having hit record highs four times in August already, the 8.7% gain in 2018 so far hasn’t translated into big gains for most of the Companies in the market as only a handful of index members have been able to keep pace with the record-setting rally. Interestingly, only two stocks from the index — Reliance Industries and Bajaj Finance — rose to their record highs on Wednesday, when the Nifty climbed to its record of 11,450.00 points and Sensex rose to a fresh lifetime high of 37,887.56 points.
The gauge for bank stocks — Bank Nifty — also hit a record high on Wednesday and crossed the 28,000-mark for the first time ever. While half of the Nifty constituents have yielded negative returns since the beginning of January, 67% of Nifty midcap and 85% of Nifty small-cap did so during the same period. In fact 11 Companies from Nifty50 hit their 52-week lows in July. For perspective, over 70% of all stocks with a market capitalisation of Rs 1,000 crore and above are in the red.
Moreover, over a third of these 792 stocks have lost more than 20% of their value since the beginning of 2018. The stocks that have done spectacularly well are Reliance Industries (RIL), TCS, Infosys, HDFC Bank and HDFC. These five Companies together have contributed over 80% of Nifty’s gains of 919.30 points in 2018. While the Sensex has gained 11.3% in rupee terms, the broader market has underperformed, with the Nifty mid-cap losing 9.4% and the Nifty small-cap giving up nearly 17% between January and now.
At 37,887.56, the benchmark Sensex trades at a price-earnings(PE) multiple of 18.8 times to the estimated one-year forward earnings, a premium of 16.7% to the long-term average PE of 16.09 times. This compares with 8.7 times for Kospi and 14.7 for Jakarta Composite. Brazilian Bovespa and the Shanghai Composite are trading at a price-earnings multiple of 10.9 and 10.1 respectively, data from Bloomberg shows.
Another set of stocks, both in the Nifty 50, that have been stellar performers are Bajaj Finance, which has gained 60.1% since January and Bajaj Finserv which has risen nearly 35%. Among the large caps, Bajaj Finance is the best-performing stock in 2018 so far followed by TCS with 46.2% and Bajaj Finserv.