Indian equities are on a roll. The National Stock Exchange’s Nifty 50 is less than 100 points away from touching a record high, while BSE’s Sensex hit an all-time high on Monday. Apart from the usual factors such as strong domestic inflows, reduction in the goods and services tax rate on a slew of items announced on Saturday also boosted sentiment.
But the indices do not tell the whole story. Unlike in the past, this rally is not broad-based since the carnage in mid-cap and small-cap stocks continues.
That’s not all—even among the front-line Nifty stocks, it is only a handful of heavyweights that are currently driving the stock market.
If we look at the Nifty’s market capitalization (market cap) as on 20 July, it has increased by ₹ 827,836 crore from this year’s low of ₹ 7,128,244 crore that it touched on 23 March 2018.
During the same span, the market cap of the top three stocks, i.e Tata Consultancy Services Ltd, Reliance Industries Ltd and HDFC Bank Ltd, put together increased by ₹ 466,263 crore.
This means that only three stocks are responsible for more than 50% of the rise in Nifty’s market cap. What’s more, the next seven stocks taken together have contributed around 40% to the up move.
On the other hand, the market cap of 20 stocks from the Nifty 50 index has declined during this period.
Clearly, the bulk of investors don’t have much to cheer about.