The Sensex has recovered all the ground it lost during last month’s sell-off and has powered ahead to make new highs, but the market on Thursday is very different from what it was before the crisis.

The difference is brought out by comparing the sectoral indices on 24 July—when the Sensex hit its pre-crisis high of 15,868 points—with the indices on Wednesday, when it crossed its earlier peak.

The first difference is that the mid-cap and small-cap indices have run up far more than the Sensex. That’s probably a reflection of the fact that in the panic in August, large investors sold the most liquid stocks. It’s perhaps also because, while foreign investors, who typically have large holdings in frontline stocks, sold out in August, retail domestic investors, who typically hold small- and mid-cap stocks, stayed put. Among sectors, the star performer was the fast moving consumer goods (FMCG) sector, with the Bombay Stock Exchange (BSE) FMCG index going up a huge 16.1%.

That’s probably because this sector is a classical defensive sector during turbulent times. ITC Ltd, Tata Tea Ltd, United Spirits Ltd and United Breweries Ltd pushed up this index. The next best performer over the 24 July-19 September period was the oil and gas sector, with the BSE Oil and Gas index moving up 8.7%. The star in this group has been Reliance Industries Ltd, which has been moving this index up. The other companies in the group, with the exception of Cairn Energyand Reliance Petroleum Ltd, haven’t really performed.

The Bankex was next, moving up 4% over the period. The rise in the Bankex, together with the BSE Capital Goods index, which was up 2.5%, shows that investors continued to believe in the strength of the India economy story.

No prizes for guessing which was the worst performing sector—BSE IT index is down 9.5% from its 24 July level. Health-care stocks haven’t done well at all, losing 1.9% over the period. Auto stocks have stayed more or less flat, with the BSE Auto index down a mere 0.6%. Realty stocks are up 1% from 24 July.

If we take the current month, the biggest gainer has been BSE Realty index, followed by the Bankex and the Oil and Gas index, or rather Reliance Industries. Interestingly, the FMCG index has continued to outperform the Sensex during the current month, as have metals. Capital goods, autos, health care and, of course, IT have underperformed the Sensex this month.

Back with a vengeance

Foreign institutional investors (FIIs) bought equities worth Rs2,485 crore in the cash segment on Wednesday, data published by the Securities and Exchange Board of India (Sebi) shows.

In the futures segment, they took long positions worth another Rs3,280 crore. Put together, the inflow of Rs5,765 crore ($1.4 billion) amounts to 50% of the inflows seen since the markets started recovering on 22 August. It’s no wonder FII favourites HDFC Ltd, HDFC Bank and Bharti Airtel Ltd were among the biggest gainers on Wednesday. The total inflows in the cash and futures markets since 22 August now stand at $2.8 billion (Rs11,172 crore), offsetting about 60% of the sales FIIs had made after the markets started correcting on 25 July.

MF cash levels

Domestic mutual funds are sitting on reasonably high cash levels of around Rs11,600 crore based on their August portfolios, data collated by reveals. Cash and cash equivalents are as high as 9% of total industry assets. That’s after having invested Rs5,200 crore in the markets between 25 July and end-August. So far this month, mutual funds have invested just Rs57 crore in the secondary market, which means much of the cash reserves are intact.

Coupled with the enthusiasm being shown by FIIs, investments by mutual funds would ensure that inflows into the markets would remain healthy in the near-term.

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