Share of top 50 stocks in NSE turnover declines
Mumbai: The contribution of top 50 stocks by market capitalization to the total turnover of equities in the cash segment of National Stock Exchange (NSE) in November fell to the lowest since at least 2009, indicating that trading and investment interest in stocks has expanded beyond blue chips.
These stocks accounted for 43% of turnover during the month, compared with 76% in April 2009, data from brokerage IIFL Institutional Equities Ltd showed. The second-highest peak of such contribution was 73% in September 2013.
“The declining turnover of bluechip stocks as pointed out in the chart basically reflects the investor attention mid-cap and small-cap continue to enjoy in the form of increased trading activity and liquidity inflow, given that they have been outperforming large-cap (stocks) for some time now,’ Ashutosh Datar, economist at IIFL said.
The share of the top 50 stocks in NSE’s market cap too has been declining for a while.
At the end of December 2017, market cap of top 50 stocks on NSE was 52.51% of the market cap of all stocks listed on the exchange, data from Bloomberg showed. At the end of December 2013, this was 64.245%.
The shift in investor attention also has much to do with the increasing dominance of domestic investors in the stock market.
“Earlier, FIIs (foreign institutional investors) were dominant participants in the Indian equity market, and blue chip was on their preference list,” said Dhananjay Sinha, head of research at Emkay Global Financial Services Ltd.
“Gradually, DIIs (domestic institutional investors) and retail investors have increased the pace of their investments, especially in the last few years, leading to more action beyond these blue chip stocks,” added Sinha.
In 2015, 2016 and 2017, while FIIs pumped in a net of Rs18,355.52 crore, Rs18,782.75 crore and Rs49,350.51 crore in Indian shares, respectively, DIIs invested a net of Rs66,841.95 crore, Rs35,526.37 crore and Rs90,834.80 crore, respectively.
“Retail traders also largely look at small and mid cap stocks, and a buoyant market is keeping their trading activity upbeat,” added Sinha.
NSE’s benchmark index Nifty and Nifty mid-cap index both scaled record highs on Tuesday.
Sameet Chavan, chief analyst-technical and derivatives at Angel Broking Pvt. Ltd said his brokerage has been highlighting the spectacular run some of the smaller size midcap stocks have enjoyed, adding the frenzy is continuing. Some stocks have sharply moved up in the last couple of days, he said.
“Yes; such euphoric moves generally does not bode well for the markets, but according to us, one can still look for trading opportunities in such selective propositions. But, one needs to be participating in a conservative manner and by following strict stop losses,” he said.
While market participants expect the trend of share of top 50 stocks in the turnover declining for now, a liquidity crunch may change the scene.
“So long as the retail flows are strong and markets are buoyant, this trend will continue. Also, if there is liquidity deficit, this trend may change,” said Sinha of Emkay.