Nifty pulls back from all- time highs in November

A look at the performance of the key sectoral indices and the businesses driving them

The Indian equity markets are in a bull- run since the start of 2016 with the primary Stock Index ‘Nifty’ rising more than 51 percent from the lows of February 2016. Year to date, the Index has returned more than 26 percent on the back of a liquidity driven global rally, moderate rise in domestic corporate earnings, mounting investments in the equity markets by the country’s financial institutions and upsurge in retail participation in equity linked funds. The robust growth in investments by domestic institutions in India has also led to a decline on the dependence of Foreign Institutional Investors who were considered the driving force behind a majority of the rallies in the Indian equities markets until a couple of years ago.

Looking at the sector- wise performance for the year, of the nine major sectoral indices chosen, eight have generated positive returns with the exception of the pharmaceuticals index. While five sectors outperformed the broader Nifty- comprising of twelve sectors representing the economy, three of them underperformed with the pharma index down close to 10 percent for the year.

A quick check of the top three sectoral indices as on 10th November 2017 and the finest performing companies contributing to the broader rally-

The gains are led by the Nifty Realty Index which returned more than 85 percent for the year. The free float market capitalization index comprises of 10- large real- estate companies with DLF individually having a weightage of close to 25 percent. Share prices of the company rose 87 percent during the current calendar year; from ₹111.70 at the end of 2016 to ₹207.90, with most of the other major real estate companies either delivering equally good returns or bettering the index leader. Starting with Indiabulls, the real estate major returned more than 210 percent, Sobha and Godrej properties rose more than 100 percent, Brigade Enterprises spiked 88 percent while Unitech, Prestige and Oberoi generated returns in excess of 60 percent. The only laggard was HDIL, which remained flat for the year.

The second best performing sectoral index was the Nifty Metals Index made up of 15 companies based on free float market cap. The top five performers in 2017 include Tata Steel, Hindalco, JSW Steel, SAIL and Vedanta with the listed companies returning between 50- 80 percent and building on the gains of last year following a modest uptick in the prices of metals in the global markets. The steel industry in particular rose on the back of the Central Government’s decision to restrict imports. The laggards include NMDC, flat for the year and Coal India, down about 5 percent.

Close on the heels of the metals index was the financial services sector with YTD gains of more than 42.5 percent. The index with 15- components is a mix of commercial banks and NBFC’S and is led by HDFC Bank and HDFC which together account for more than 47 percent of the total weightage in the index. While share prices of HDFC Bank rose by more than 51 percent, the latter delivered about 35 percent returns during the similar period. Government run State Bank of India which until the mid of October was in negative territory for the year, surged more than 31 percent in two weeks to settle with gains of 33 percent YTD following the Government’s announcement to recapitalise State run banks. The highlight however are the Bajaj trio comprising of Bajaj- Finance, Finserv and Holdings & Investment, with stock prices spiking 107, 74 and 61 percent for the year correspondingly on the back of stupendous earnings numbers. Bajaj Finance which closed around ₹6 at the end of 2008 has in fact amplified by close to 30,000 percent after settling at ₹1745 on November 10th 2017. Likewise, equity prices of Bajaj Finserv have gained by more than 3,300 percent while Bajaj Holdings recorded gains of more than 1,100 percent in the last 10- years.

Technical Outlook-
Coming back to the primary market index; Nifty, the Index scaled back some of its gains in November, slipping by close to 4 percent after testing fresh all- time highs of 10490. The pullback, mostly led by profit booking also coincided with the Index testing the top of the long term bullish channel. Nevertheless, the slide which looked to take an ugly turn was arrested and the Index quickly rebounded largely due to a ratings upgrade from Moody’s and settled above key technical levels at 10230- 10250 on 17th November 2017. For the remainder of the year, Nifty is likely to find 

supports in the 10140- 10240 zone with resistances at 10550 and 10700 correspondingly. The strategy continues to remain ‘buy on declines’ unless the Index settles below the recent lows of 10100.


TakeStock Research delivers exclusive, well researched content in FX, Equities and Commodities for the global financial services industry. Our content writing services include live market commentaries, real- time updates of global economic events, fundamental and technical analysis, trading strategies, preview and review of corporate earnings, topics related to personal finance, educational & training modules. Our clients are spread across geographies and include financial institutions, FX brokers, establishments catering to research & advisory, training and educational institutions.