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Nifty at 23,000 – Which stocks were the major drivers?

28 May 2024 , 09:50 AM

NIFTY AT 23,000; KNOW THE STOCKS THAT FLATTERED

When the Nifty touched an all-time high of 23,000 last week, the big question was how did they manage it? That is a fairly legitimate question. This rally in the nifty came at a time when the domestic political situation looks quite fluid, with the election results expected only on June 04, 2024. Then there is the geopolitical situation in the Middle East and West Asia, which continues to pose a perpetual risk to oil prices. Above all, the Indian corporate results were not really up to the mark with profits under pressure from multiple fronts. These risks were all reflected in the spike in the volatility index (VIX), which spiked to 21.7. That is normally a level when the markets face pressure, but then the markets appeared to defy gravity. Here is the macro story of the Nifty as it scales a new high.

Last week, the Nifty closed at 22,957, after scaling a recent peak of 23,026. The Nifty has faced some pressure at that level, but that is only apparent when the Nifty touches such a psychological level. Let us look at the internals of the Nifty 50 stocks.

  • Over the last 1 month, the Nifty delivered 2.48% returns. In the last 1 month, a total of 35 stocks gave positive returns while 15 stocks gave negative returns.
  • If you take the last 1 year, then the Nifty delivered 25.30% returns, which is quite impressive. Over the last 1 year, 42 companies gave positive returns and only 8 companies on the Nifty gave negative returns for the full year.
  • The Nifty itself has bounced a full 24.24% from its year low of 18,478 levels, while it is just about 0.3% away from its yearly high. Clearly, the momentum is strong and also favourable for the Nifty.

The gist of the story is that there are 2 themes that have driven the Nifty to all-time highs. The first theme is PSU stocks, where there has been a lot of value catch up happening. The second is the auto stocks, where there has been a lot of traction in the last 1 year on the back of solid demand, sharp margins and hopes of revival in rural demand.

LET US START WITH THE MOMENTUM 1-MONTH RETURNS

Although this is a look at what paved the way for the Nifty to reach a new peak in the last 1 year, it would be good to look at the momentum returns first. For the last one month driving to the peak, Nifty index as a whole was up 2.48%. Out of the 50 stocks in the Nifty 50 index, 35 stocks gave positive returns and 15 gave negative returns in the last month. Here is a ranking of the top stocks in terms of 1-month returns,.

Stock
Symbol
Market Price 1-Month Return 1-Year Return 52-week High 52-week Low Bounce from Low Distance to High
M&M 2,576.45 25.32% 101.89% 2,617.40 1,254.50 105.38% 1.59%
HEROMOTOCO 5,105.00 16.50% 87.29% 5,198.15 2,706.00 88.65% 1.82%
COALINDIA 500.15 12.88% 108.71% 507.35 223.25 124.03% 1.44%
TECHM 1,318.55 11.47% 20.37% 1,416.30 1,060.10 24.38% 7.41%
ADANIENT 3,381.00 11.22% 33.40% 3,457.85 2,142.00 57.84% 2.27%
AXISBANK 1,172.95 10.42% 27.46% 1,182.90 910.20 28.87% 0.85%
BPCL 654.70 10.24% 80.04% 687.95 331.45 97.53% 5.08%
POWERGRID 319.05 9.78% 33.98% 327.75 172.50 84.96% 2.73%
BRITANNIA 5,247.00 8.53% 14.84% 5,386.05 4,347.70 20.68% 2.65%
DIVISLAB 4,116.00 8.09% 19.99% 4,175.00 3,295.30 24.91% 1.43%

Data Source: NSE

What are the sectors that are showing momentum over the last one month? The momentum clearly appears to be in favour of the auto and PSU stocks. Out of the top 10 stocks by 1-month returns, 3 are PSU stocks, and 2 are auto stocks. The other stocks are fairly spread out. Normally, IT, FMCG and pharma tend to rank much lower on the short term returns scale. However, in this case, Tech Mahindra, Britannia, and Divi’s Labs have bucked that trend. Some of these trends have been persistent for last few months.

What about the laggards in the Nifty on one-month returns? The bottom 10 on monthly returns are dominated by financial stocks, with 6 of the laggards for the last one month belonging to the financial sector. One of the big losers in the month was Kotak Bank, which was more due to the regulatory strictures. The top 10 stocks gave an average monthly return of 12.45% for the last one month and dominated most of the momentum.

WHICH STOCKS LED NIFTY TO 23,000 IN LAST 1 YEAR

For a more fundamental perspective, we turn to the full year returns as the Nifty traversed to the 23,000 levels. Here are the best and worst performers for the last one year. Nifty index generated annual returns of 25.30%. Out of the 50 stocks in the Nifty 50 index, 42 stocks gave positive returns and only 8 stocks gave negative returns in last one year. The table below captures the top-10 Nifty stocks ranked on returns over last one year.

Stock
Symbol
Market Price 1-Month Return 1-Year Return 52-week High 52-week Low Bounce from Low Distance to High
NTPC 374.50 6.63% 114.87% 380.40 171.85 117.92% 1.58%
COALINDIA 500.15 12.88% 108.71% 507.35 223.25 124.03% 1.44%
M&M 2,576.45 25.32% 101.89% 2,617.40 1,254.50 105.38% 1.59%
ADANIPORTS 1,416.90 7.24% 95.46% 1,448.80 703.00 101.55% 2.25%
BAJAJ-AUTO 8,966.40 2.89% 92.68% 9,357.95 4,492.05 99.61% 4.37%
HEROMOTOCO 5,105.00 16.50% 87.29% 5,198.15 2,706.00 88.65% 1.82%
TATAMOTORS 958.90 -3.14% 86.57% 1,065.60 509.10 88.35% 11.13%
BPCL 654.70 10.24% 80.04% 687.95 331.45 97.53% 5.08%
SHRIRAMFIN 2,404.00 -2.58% 74.32% 2,658.00 1,356.20 77.26% 10.57%
ONGC 282.65 1.40% 70.63% 292.95 150.05 88.37% 3.64%

Data Source: NSE

What are the sectors that emerged leaders in the last one year as the Nifty journeyed to 23,000? The momentum was with auto stocks and PSU stocks. In the top-10 list, by 1-year returns, there were 4 PSU stocks (NTPC, Coal India, BPCL and ONGC), and 4 auto stocks (M&M, Bajaj Auto, Hero Motocorp and Tata Motors). Of the other two stocks, Adani Ports was a story of the group revival, while Shriram Finance on the group merger. Based on annual returns, 3 stocks generated more than 100%, while 16 stocks generated more than 50% returns. A total of 29 of the 50 Nifty companies actually outperformed the Nifty index returns; doing better than the benchmark. Power thrust came from autos and PSUs.

How about the laggards on a 1-year basis. There were 8 stocks that gave negative returns for FY24 with 4 stocks falling more than 5% for the year. Kotak Bank and HDFC Bank were expected to be there. While HDFC Bank is struggling to come to terms with the HDFC merger, Kotak Bank has been under pressure due to the RBI order new accounts. The other two; Hindustan Unilever and Asian Paints took a hit on the back of higher than expected crude oil prices and pressure on rural sales. In fact, the stocks at the bottom were largely dominated by financials and FMCG stocks in terms of 1-year returns. They really did not participate in the Nifty journey to 23,000.

HOW RESILIENT WERE NIFTY STOCKS IN THE JOURNEY TO 23,000

How do we measure resilience of a stock. One way to measure resilience is to look at the extent of bounce in the stock from 52-week lows. That may not be precise, but it is a good approximation of a stock’s resilience. Here we will rank the stocks on how much the Nifty stocks bounced from their respective lows of last one year. For Nifty, as a whole, the bounce from the low of the year was 24.24%. Out of the 50 stocks in the Nifty 50 index, 4 stocks bounced more than 100% from the lows, while 20 stocks bounced more than 50% from the lows and a total of 32 stocks showed more resilience than the Nifty index. The theme of resilience approximately corresponds to the annual gainers in the Nifty 50 index.

Stock
Symbol
Market Price 1-Month Return 1-Year Return 52-week High 52-week Low Bounce from Low Distance to High
COALINDIA 500.15 12.88% 108.71% 507.35 223.25 124.03% 1.44%
NTPC 374.50 6.63% 114.87% 380.40 171.85 117.92% 1.58%
M&M 2,576.45 25.32% 101.89% 2,617.40 1,254.50 105.38% 1.59%
ADANIPORTS 1,416.90 7.24% 95.46% 1,448.80 703.00 101.55% 2.25%
BAJAJ-AUTO 8,966.40 2.89% 92.68% 9,357.95 4,492.05 99.61% 4.37%
BPCL 654.70 10.24% 80.04% 687.95 331.45 97.53% 5.08%
HEROMOTOCO 5,105.00 16.50% 87.29% 5,198.15 2,706.00 88.65% 1.82%
ONGC 282.65 1.40% 70.63% 292.95 150.05 88.37% 3.64%
TATAMOTORS 958.90 -3.14% 86.57% 1,065.60 509.10 88.35% 11.13%
POWERGRID 319.05 9.78% 33.98% 327.75 172.50 84.96% 2.73%

Data Source: NSE

What are the sectors that are showing resilience in terms of bounce from the 52-week lows. The top 10 stocks by resilience are dominated PSU stocks and auto stocks. In fact, there are 5 PSU stocks in the top-10 and 4 auto stocks in this list. The only stock from outside this group is Adani Ports, which has shown resilience from the lows that the Adani group stocks hit last year. While auto appears to be a mix of volume, margin, and EV related triggers; the PSU stocks appear to have benefited from the government policy to open up a more critical role for PSUs; especially in areas like defence, power, and hydrocarbons.

What is the story of the laggards in the Nifty in terms of the lowest bounce from the 52-week lows? There were 5 stocks that have bounced less than 10% from the lows of the year. That means, they are still very close to their lows and that is a sign of weakness at a time when the Nifty and the Sensex are at lifetime highs. Among the laggards were; HDFC Life, LTIM, Asian Paints, Hindustan Unilever, and ITC. Like in the annual returns story, even in the resilience story, the pressure is on the financials and FMCG stocks. If you look at the bottom-20, then IT also gets included quite extensively in this list.

SWING STORY – HOW CLOSE ARE NIFTY STOCKS TO YEARLY HIGHS?

One final way to look at the Nifty journey to 23,000 is to look at the companies that are still close to the peaks. The Swing Factor, ranks stocks on their proximity to the 52-week high. The closer to the highs of the year, the stronger the swing factor. In fact, the Nifty index itself is just about 0.30% short of the 52-week high. Out of the 50 stocks in the Nifty 50 index, 24 stocks are less than 5% away from their 52-week highs, while a total of 29 stocks are less than 10% away from their 52-week highs.

Stock
Symbol
Market Price 1-Month Return 1-Year Return 52-week High 52-week Low Bounce from Low Distance to High
MARUTI 13,000.05 0.44% 40.06% 13,073.95 9,159.00 41.94% 0.57%
EICHERMOT 4,880.15 7.73% 33.67% 4,908.00 3,160.00 54.44% 0.57%
BHARTIARTL 1,389.50 3.90% 68.77% 1,397.75 795.00 74.78% 0.59%
AXISBANK 1,172.95 10.42% 27.46% 1,182.90 910.20 28.87% 0.85%
DIVISLAB 4,116.00 8.09% 19.99% 4,175.00 3,295.30 24.91% 1.43%
COALINDIA 500.15 12.88% 108.71% 507.35 223.25 124.03% 1.44%
TATASTEEL 174.90 5.62% 66.76% 177.55 104.30 67.69% 1.52%
NTPC 374.50 6.63% 114.87% 380.40 171.85 117.92% 1.58%
M&M 2,576.45 25.32% 101.89% 2,617.40 1,254.50 105.38% 1.59%
SBIN 828.00 7.18% 42.55% 841.25 543.20 52.43% 1.60%

Data Source: NSE

In this ranking, you find companies like Bharti Airtel, Axis Bank, Divi’s Labs, and Tata Steel entering the top list, showing strong momentum, although returns may not be so great. Here the top-10 list still has 3 auto companies, but PSU stocks are limited to just 2, while the rest of the list is more stock specific. Unless the previous lists, this list finds more of stock specific stories rather than just sector level stories. That is why swing or the proximity to the high, gives a new perspective to the Nifty rally.

What is the story of the laggards in the Nifty in terms of proximity to the 52-week highs. There are 5 stocks that are more than 20% away from their 52-week highs while there are 13 stocks that are more than 10% away from the highs. The list includes familiar names from the financial, IT and FMCG sector, albeit to a lesser extent.

CONVICTION INDEX: WHICH NAMES ARE COMMON TO THE LISTS

One way to check the conviction of outperformance, is to look at the stocks that outperform on multiple parameters. Here we looking at momentum in term of 1-month returns, fundamentals in terms of 1-year returns, resilience in terms of bounce from lows and swing in terms of proximity to the highs. Here is what we are reading from the data.

  • Auto stocks once again make the cut in most of the lists. On a sectoral basis, it is the auto sector that finds maximum conviction, ranking high on all the 4 lists. Specific stocks like M&M, Bajaj, and Hero Moto feature in most lists.
  • Coal India is the one PSU stock that figures in all the four lists, showing the highest level of conviction. Other PSU like NTPC and oil stocks also rank quite high. Clearly, apart from auto, PSU appears to be the other big theme driving the Nifty mood.
  • Finally, there are stocks like HDFC Bank, Kotak Bank, LTIM, Hindustan Unilever, and Asian Paints which figure at the bottom of most of the lists, showing low conviction.

To sum up, while the heavyweights typically pull up the index value, the conviction for the rally to 23,000 has come from automobiles and the PSU space.

Related Tags

  • BottomPerformers
  • LargeCaps
  • midcaps
  • nifty
  • sensex
  • smallcaps
  • TopPerformers
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