Nifty at 25,000 – Which large caps were the major drivers?

4 Aug 2024 , 09:22 PM

NIFTY AT 25,000; THE STOCKS THAT FLATTERED

The month of June 2024 had seen political stability returning to the markets with the formation of a coalition government and the tapering of VIX to normal levels. That had led the Nifty to touch 24,000 levels by the close of June 2024. In July 2024, the Markets did better; crossing the 25,000 mark and Sensex the 82,000 mark. However, the month of July had other challenges. There was the full budget and the government did mete out some rough treatment to stock markets. The STT on futures & options was increased while the tax rates on long term capital gains and short term capital gains was also raised by 250 bps and 500 bps respectively. There were also apprehensions that freebies to states like Bihar and Andhra Pradesh could spike. Despite these challenges, fiscal deficit for FY25 was further cut from 5.1% of GDP to 4.9% of GDP. By the close of July 2024, Nifty had rallied to 25,000.

It is also essential to put the Nifty rally in perspective. Nifty gained 5,000 points from 20,000 to 25,000 in a span of 221 sessions. If you look at the FPI action in July 2024, they were net buyers of Rs32,365 crore in July, of which Rs26,059 crore came through secondary markets and Rs6,306 crore came into through IPOs. The month of July also saw Rs16,431 crore coming in from FPIs into debt. July 2024 again saw growth momentum in generic indices. Nifty closed July with gains of 3.60% while Sensex gained 3.43% in the month. We shall now get down to the specific stocks and look at the best performing stocks in the Indian market. We look at best performers from 4 angles; viz. momentum, value, resilience, and swing.

LET US START WITH THE MOMENTUM 1-MONTH RETURNS

We start with the short term momentum story; i.e., stocks that generated the best returns in last one month among the large caps. As the Nifty scaled 25,000, the index as a whole was up a healthy 3.60% in July. Out of the 50 stocks in the Nifty index, 36 stocks gave positive returns and 14 gave negative returns in July 2024. Here are the top 15 stocks.

Stock Symbol	Market Price	1-Month Return	1-Year Return	52-week High	52-week Low	Bounce from Low	Distance to High
ONGC	341.00	25.21%	93.41%	344.70	171.50	98.83%	1.07%
HDFCLIFE	713.00	18.78%	11.02%	722.50	511.40	39.42%	1.31%
SBILIFE	1,761.80	17.67%	38.07%	1,791.15	1,251.65	40.76%	1.64%
INFY	1,847.65	16.46%	35.70%	1,903.00	1,348.45	37.02%	2.91%
ITC	493.05	15.07%	6.22%	510.65	399.35	23.46%	3.45%
BPCL	348.60	14.63%	-7.52%	359.05	165.73	110.34%	2.91%
NTPC	423.50	14.52%	88.07%	424.35	211.80	99.95%	0.20%
TATAMOTORS	1,142.65	14.21%	77.80%	1,179.00	593.30	92.59%	3.08%
COALINDIA	540.30	13.82%	124.84%	542.25	227.00	138.02%	0.36%
SUNPHARMA	1,714.00	12.83%	50.00%	1,746.45	1,068.35	60.43%	1.86%
HCLTECH	1,639.50	11.69%	44.10%	1,697.35	1,111.90	47.45%	3.41%
TCS	4,387.00	10.53%	27.38%	4,431.00	3,311.00	32.50%	0.99%
TATACONSUM	1,210.00	10.40%	41.04%	1,256.44	820.05	47.55%	3.70%
MARUTI	13,343.05	10.33%	37.48%	13,680.00	9,254.15	44.18%	2.46%
POWERGRID	361.50	9.56%	43.41%	362.50	179.82	101.03%	0.28%

Data Source: NSE

Which are the sectors that showed momentum in the last one month? The momentum does not show any clear trend, but there were several diverse sectoral stories. Out of the top 15 stocks by 1-month returns, 5 are PSU stocks, 3 are technology stocks; while 2 each are from insurance, FMCG and the auto space. Sun Pharma was the sole healthcare stock in the list.

What about the list at the bottom? There are several heavyweight financials like Axis Bank, Bajaj Finance and HDFC Bank giving negative returns. Nestle and Reliance also featured in this list. The top 10 stocks gave average monthly return of 16.32% while the top 20 stocks gave 12.84% for July 2024. The bounce was prominent in IT and FMCG stocks.

BIG RALLY FACTORS IN THE LAST ONE YEAR

One month returns give a momentum perspective, but not a fundamental perspective. For that, we turn to full year returns as the Nifty traversed to the 25,000 levels. Nifty index generated annual returns of 26.74%. Out of the 50 stocks in the Nifty 50 index, 45 stocks gave positive returns and only 5 stocks gave negative returns in last one year. The table below captures the top-15 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
COALINDIA	540.30	13.82%	124.84%	542.25	227.00	138.02%	0.36%
ADANIPORTS	1,588.95	7.84%	107.77%	1,621.40	751.55	111.42%	2.00%
BAJAJ-AUTO	9,740.00	2.08%	97.62%	10,038.80	4,541.00	114.49%	2.98%
ONGC	341.00	25.21%	93.41%	344.70	171.50	98.83%	1.07%
M&M	2,827.00	-1.65%	89.40%	3,013.50	1,415.75	99.68%	6.19%
NTPC	423.50	14.52%	88.07%	424.35	211.80	99.95%	0.20%
TATAMOTORS	1,142.65	14.21%	77.80%	1,179.00	593.30	92.59%	3.08%
HEROMOTOCO	5,375.00	-4.13%	73.17%	5,894.55	2,890.00	85.99%	8.81%
BHARTIARTL	1,502.10	3.54%	68.84%	1,536.25	847.05	77.33%	2.22%
SHRIRAMFIN	2,980.00	2.22%	61.26%	3,059.45	1,760.10	69.31%	2.60%
GRASIM	2,760.00	1.49%	50.57%	2,877.75	1,758.05	56.99%	4.09%
SUNPHARMA	1,714.00	12.83%	50.00%	1,746.45	1,068.35	60.43%	1.86%
EICHERMOT	4,963.65	7.19%	45.46%	5,058.90	3,274.90	51.57%	1.88%
HINDALCO	672.25	-2.37%	45.12%	715.25	438.15	53.43%	6.01%
ULTRACEMCO	11,960.00	0.67%	44.71%	12,078.00	7,987.65	49.73%	0.98%

Data Source: NSE

What are the sectors that emerged leaders in the last one year as the Nifty journeyed to 25,000? The story was the same as last time; with 5 auto stocks and 3 PSU stocks in the list. In addition, there were also 2 cement stocks (Ultratech and Grasim); while the rest were largely spread out. Based on annual returns, 2 stocks generated more than 100%, while 12 stocks generated more than 50% returns. A total of 31 of the 50 Nifty companies outperformed the Nifty index returns; although the thrust came from autos and PSUs.

How about the laggards on a 1-year basis. There were 5 stocks that gave negative returns for FY24. The list was again dominated by financials with HDFC Bank, Kotak Banka and Bajaj Finance giving negative returns in the last one year. Clearly, financials have not had a great year and that has, perhaps, kept the Nifty from giving better returns. In the case of financials, the challenge appears to be of business growing at a slower pace and net interest margins (NIMs) narrowing. The sector that really turned around in the month was the FMCG space, with the sharp FMCG rally in July on the back of rural demand revival hopes.

HOW RESILIENT WERE NIFTY STOCKS AT MOUNT 25K

One way to measure resilience is the extent of bounce in the stock from 52-week lows. That may not be precise, but it is a good approximation of resilience in the stock. These are Nifty stocks ranked on the extent bounce from the 52-week lows. For the Nifty, as a whole, the bounce from the low of the year was 32.77%; largely led by IT and FMCG in July. Out of the 50 stocks in the Nifty 50 index, 5 stocks bounced more than 100% from the lows, while 18 stocks bounced more than 50% from the lows and a total of 34 stocks showed more resilience than the Nifty index. Resilience could broadly correspond with 1-year returns.

Stock Symbol	Market Price	1-Month Return	1-Year Return	52-week High	52-week Low	Bounce from Low	Distance to High
COALINDIA	540.30	13.82%	124.84%	542.25	227.00	138.02%	0.36%
BAJAJ-AUTO	9,740.00	2.08%	97.62%	10,038.80	4,541.00	114.49%	2.98%
ADANIPORTS	1,588.95	7.84%	107.77%	1,621.40	751.55	111.42%	2.00%
BPCL	348.60	14.63%	-7.52%	359.05	165.73	110.34%	2.91%
POWERGRID	361.50	9.56%	43.41%	362.50	179.82	101.03%	0.28%
NTPC	423.50	14.52%	88.07%	424.35	211.80	99.95%	0.20%
M&M	2,827.00	-1.65%	89.40%	3,013.50	1,415.75	99.68%	6.19%
ONGC	341.00	25.21%	93.41%	344.70	171.50	98.83%	1.07%
TATAMOTORS	1,142.65	14.21%	77.80%	1,179.00	593.30	92.59%	3.08%
HEROMOTOCO	5,375.00	-4.13%	73.17%	5,894.55	2,890.00	85.99%	8.81%
BHARTIARTL	1,502.10	3.54%	68.84%	1,536.25	847.05	77.33%	2.22%
SHRIRAMFIN	2,980.00	2.22%	61.26%	3,059.45	1,760.10	69.31%	2.60%
SUNPHARMA	1,714.00	12.83%	50.00%	1,746.45	1,068.35	60.43%	1.86%
SBIN	861.90	2.46%	40.99%	912.00	543.20	58.67%	5.49%
GRASIM	2,760.00	1.49%	50.57%	2,877.75	1,758.05	56.99%	4.09%

Data Source: NSE

What are the sectors that are showing resilience in terms of bounce from the 52-week lows. The top 15 stocks by resilience are dominated PSU stocks and auto stocks. In fact, there are 6 PSU stocks in the top-15 and 4 auto stocks in this list. The stocks from outside two segments included Adani Ports, Shriram Finance, Sun Pharma, Bharti Airtel, and Grasim. Gains in auto stocks was a mix of volumes, margin, and EV related triggers; while PSU stocks benefited from the government decision empower profit-making PSUs; especially in defence, power, and hydrocarbons.

What is the story of the laggards in the Nifty in terms of lowest bounce from the 52-week lows? There were 2 stocks that have bounced less than 10% from the lows of the year and 6 stocks bouncing less than 20% from the lows; clearly a sign of market strength. The bottom list is dominated by the financial players and FMCG stocks, which is not surprising. However, these are less of  sectoral stories and more of company-specific stories. Among the laggards were; Bajaj Finserv, IndusInd Bank, Bajaj Finance, Kotak Bank, Nestle, and Asian Paints.

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

Another interest way to understand the undertone of the market is how close these stocks are to their yearly highs. The closer they are, the higher the swing factor. When Nifty is scaling new highs of 25,000; it is essential that a solid stock is able to resist profit booking pressure at higher levels. The closer the stock is to the yearly highs, the stronger the swing factor. The Nifty index itself has a strong swing factor as it is just is just 0.27% short of the 52-week high. Out of the 50 stocks in the Nifty 50 index, 32 stocks are less than 5% away from their 52-week highs, while a total of 41 stocks are less than 10% away. Clearly, the swing has turned favourable in the month of July 2024 for 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
NTPC	423.50	14.52%	88.07%	424.35	211.80	99.95%	0.20%
POWERGRID	361.50	9.56%	43.41%	362.50	179.82	101.03%	0.28%
COALINDIA	540.30	13.82%	124.84%	542.25	227.00	138.02%	0.36%
ULTRACEMCO	11,960.00	0.67%	44.71%	12,078.00	7,987.65	49.73%	0.98%
TCS	4,387.00	10.53%	27.38%	4,431.00	3,311.00	32.50%	0.99%
ONGC	341.00	25.21%	93.41%	344.70	171.50	98.83%	1.07%
DRREDDY	6,882.85	8.41%	21.54%	6,966.00	5,205.55	32.22%	1.19%
HDFCLIFE	713.00	18.78%	11.02%	722.50	511.40	39.42%	1.31%
SBILIFE	1,761.80	17.67%	38.07%	1,791.15	1,251.65	40.76%	1.64%
SUNPHARMA	1,714.00	12.83%	50.00%	1,746.45	1,068.35	60.43%	1.86%
EICHERMOT	4,963.65	7.19%	45.46%	5,058.90	3,274.90	51.57%	1.88%
TECHM	1,538.05	4.91%	35.06%	1,569.00	1,098.15	40.06%	1.97%
ADANIPORTS	1,588.95	7.84%	107.77%	1,621.40	751.55	111.42%	2.00%
DIVISLAB	4,901.95	6.86%	35.13%	5,008.00	3,295.30	48.76%	2.12%
BHARTIARTL	1,502.10	3.54%	68.84%	1,536.25	847.05	77.33%	2.22%

Data Source: NSE

Unlike the 1-year returns list and the resilience list, which are largely similar, the swing list finds some new entrants. In the top-15, you find companies like HDFC Life, SBI Life, Divi’s Labs, Tech Mahindra, and Reddy Labs. That is what makes this test unique as it also gives weight to companies that are close to their highs, irrespective of returns. The top-15 list has a strong dominance of recent performers with 3 players from pharma and 2 players each from IT and life insurance. The swing list finds more of stock specific stories than just sector level stories. That is why swing or proximity to highs, gives a refreshingly new perspective.

What is the story of the laggards in the Nifty in terms of proximity to the 52-week highs. There are 9 stocks that are more than 10% away from their 52-week highs; and the list is again dominated by the financials. Some of the other stocks showing selling pressure at higher levels include Tata Steel< Titan, and Adani Enterprises.

CONVICTION INDEX: WHAT ARE THE COMMON FACTORS?

One way to check the conviction of outperformance, is to look at stocks that outperform on multiple parameters. What are the common factors among leaders in terms of 1-month returns, 1-year returns, resilience, and swing? Here is what we read from the data.

• Infrastructure stocks (especially those with PSU ownership) have been the stellar performers in the last one year. These infrastructure stocks appear to be scoring on all the four parameters measured above.
• Auto stocks which were the dominant force across categories, are now visible largely in the long term returns and the resilience category. That is the story of many PSUs too, where profit booking is visible at higher levels.
• The big surprise is the swing factor favouring pharma stocks and life insurance stocks as they have dominated 1-month returns and swing factor. That could be a signal of things to come, and has analytical value for investors looking at future themes.

One final point!. The real action in the market may not be in the toppers list, but in the intermediate list. For example, IT and FMCG moving from the bottom to the middle and heavyweights like Reliance, and ICICI Bank holding value were the real significant stories.