New benchmarks: Indices hit records, larger market lags

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Tata Consultancy Services, ITC, HDFC Bank,  Reliance Industries , Nifty50 , Shanghai Composite, Chinese market

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On Thursday, the Nifty50 gained 20.70 points or 0.18% to end the session at a record high of 11,470.70 points.

The broader market continues to do badly with just five stocks — Tata Consultancy Services, Infosys, HDFC Bank, Reliance Industries and ITC — having between them contributed over 80% of the Nifty’s gains of 940 points in 2018. Over 70% of all stocks with a market capitalisation of at least Rs 1,000 crore are down since January. Moreover, over a third of these 792 stocks have lost more than 20% of their value. On Thursday, the Nifty50 gained 20.70 points or 0.18% to end the session at a record high of 11,470.70 points. The rally this year has been driven by purchases of local funds that have bought stocks worth nearly $10 billion; foreign portfolio investors (FPIs) have sold shares worth  $260.4 million.

Despite the spectacular rally in the benchmarks, India’s market capitalisation in dollar terms has fallen by about 5% to $2.26 trillion. The Chinese market has seen a bigger erosion in its market capitalisation of nearly 23%. Among the top 10 equity markets by market capitalisation, only the US and France have yielded positive returns so far in 2018.

New benchmarks: Indices hit records, larger market lags cats 641

India remains among the most expensive markets in the world. At 38,024.37, 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 the Kospi and 14.5 for the Jakarta Composite. Brazil’s Bovespa and the Shanghai Composite are trading at a price-earnings multiple of 10.7 and 10.3, respectively, data from Bloomberg show.

The benchmarks have rallied to new highs despite FPIs having sold stocks worth $2.4 billion between April and June. FPIs turned buyers in July with a purchase of $207.92 million and have bought shares worth $153.2 million so far in August. Another set of stocks, both in the Nifty 50, that have been stellar performers are Bajaj Finance, which has gained 61.1% since January, and Bajaj Finserv, which has put on 35.3%.

Among large-caps, Bajaj Finance is the best-performing stock in 2018 so far, followed by TCS with 46.2% and Bajaj Finserv. The top 10 Companies with the highest market capitalisation, which together account for over 27% of the total BSE market cap, have gained close to 24% since the beginning of 2018, resulting in a 2.6% gain in overall market valuation of all listed Companies on the BSE.

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