The headlines today seems to be all talking about how our benchmark
index – Sensex has hit an all time high and Nifty is not far from doing
so.
In the meanwhile you got to realize the high was made in January
2008. As of today in November 2013 this is like 5 years. In the same
period a fixed deposit would have given a much higher return and real
estate has given obscene returns.
The last such high closer to Diwali was seen in November 2010 which
saw superb moves in midcaps. Post that we saw a big correction for next
couple of years.
Now with a new high why is the sentiment close to lows.
Forget about markets and traders my interactions with the consumer
centric business tells me this is one of the bad diwalis with sales not
picking up on expected lines. The bonuses are not great either for
working class. The higher interest rates has just increased the EMIs.
There is no reprieve for businesses through lower interest costs.
Now getting to markets although Index is at a new all time high but
that can be attributed to some superb outperformance by particular
stocks and sectors.
Sun Pharma is up 450% , TCS up 315% and ITC up 187%.
If one were to look at how weightages have changed in the last 5 years have a look at this article
http://trendzofmarket.blogspot.in/2013/08/hope-for-best-but-be-ready-for-worst.html and this report from
Crisil .
ne simple example is ITC had a weight of 2.5% in 2008, now commands a
weight of 10% !! Reliance which was 13-15% is now at 8-9%. This is the
beauty of market cap weighted indices. The weightages increase with
price increase and vice versa making it a survival friendly index. There
was a time when Reliance Communications had a weight of 4-4.5%and is
now out of it.
Now let us look at the sectoral index and you realize its healthcare,
fmcg, auto and IT which have led the performance. At the same time
midcaps and smallcap index is down 40-50% from 2008 highs and that is
the reason for low sentiments.
1) BSE SMALL CAP INDEX — Now this one is no where
close to
2008/2010/2012-13 highs. Rather its down 58% from 2008, 48%
from 2010 and 23% from 2012-13 peaks.
Now if i were to adjust inflation you may well know the returns.
As a fact majority of the Investors either invest in either mutual
funds or direct equities. Remember the loads of Small/Micro Cap Funds
and Sectoral Funds that came up in 2006-2008.
2) BSE MIDCAP INDEX
This is placed a little better but nowhere close to 2008/2010/2012-13.
Its down 40% and 30% from peaks of 2008/2010.
3) BSE DOLLEX 30
Now this is the index which should matter for the Foreign Money which
is pouring in like crazy. Look at it down
36% from 2008 , 27% from 2010
and 8% down from 2012-13 highs !
So in essence the FIIs who invested in 2007-2008 are down 35-40% on
an average. They still continue to invest is the good thing.
Now just putting in a lot of other indices and then you realize how
Auto up 110% , FMCG up 170% , Healthcare up 130% and IT up 90%
Realty Index is
down like 80% !!
Autos are up 110% and mind you this is mainly large cap ones.
Bankex is just back to 2008 levels. Did cross it a few times before in last 5 years but could not sustain.
Capital Goods is down 56%. This was the favored sector in 2008
Consumer Durables is at the same price.
FMCG is
up 170% and has a very big weightage now in form of ITC
Healthcare i.e mainly Pharma stocks have been a superb performer. Some of them have become multiple also.
IT is up like
90% . Although it did not perform great in 2007.
Oil and Gas another sector which is down and out for last 5 years.
37%
down. There was a time when Reliance, Ongc,bpcl, hpcl and all of them
were the market leaders.
Powetr Index is down 50% also an Infra Index would be down similarly.
Remember the good old AMCs coming out with Infra Fund, Power Sector
Fund and how India was a power deficit country ( we still are )
PSUs have been badly hit all around in all sectors. Down
48%. Remember
Market gave a 20% circuit for this government in 2009?
We are actually
below those levels in this index.
Bottomline – A new all time high for the Sensex/Nifty would make
great headlines for newspapers and magazines but for a majority of
investors there is no major positivity coming out of it.
As an investor/trader one should now focus on being stock specific and being very cautious from now onwards.
Be careful and selective in what you are buying. It might be a good
time to get out of stocks which you dont believe in or are obscenely
priced fundamentally. Dont find good value in quality names quoting at
40-50 times or the new theme stocks like Justdial at 100 times.
This might be a good time to focus on laggards in next drop in markets.
