WHY ARE TRADERS FLOCKING TO LARGE CAPS
A very specific trend is visible in the stock markets in the last two weeks. The investors and even the traders suddenly seem to have be gravitating towards the large caps. It is not just about the stability and the safety in these large cap business models, but there is also a valuation story supporting them. Here are 4 factors that have helped large caps.
Traders and investors always tend to play one part of their game for the worst-case scenario, and that is where the large caps are scoring. However, this trend may not sustain for too long as alpha hunting is likely to come back with a vengeance after the full budget.
BSE SENSEX 30 INDEX – HOLDS STEADY IN A ROUGH MARKET
The table captures the movement of the BSE SENSEX 30 for the week to July 19, 2024.
Date | Open | High | Low | Close |
19-Jul-24 | 81,585.06 | 81,587.76 | 80,499.10 | 80,604.65 |
18-Jul-24 | 80,514.25 | 81,522.55 | 80,390.37 | 81,343.46 |
17-Jul-24 | 80,731.49 | 80,898.30 | 80,598.06 | 80,716.55 |
16-Jul-24 | 80,731.49 | 80,898.30 | 80,598.06 | 80,716.55 |
15-Jul-24 | 80,686.54 | 80,862.54 | 80,556.97 | 80,664.86 |
12-Jul-24 | 80,093.62 | 80,893.51 | 79,843.39 | 80,519.34 |
Weekly Returns | +0.11% |
Data Source: BSE
In a week with just 4 trading days, the Sensex showed a lot of character; holding above the 80,000 mark. The trigger for the Sensex this week came from IT and FMCG stocks; but credit for a flat closing must also go to the stability provided by the banks. For the week, the Sensex closed with subdued gains of 0.11%. During the week, the Sensex touched a high of 80,898 and a low of 80,390. The Sensex closed the week 85 points higher. For now, 81,000 looks to be the next major target; although for now, that is proving to be elusive.
NIFTY 50 INDEX – ANOTHER GENERIC INDEX, ANOTHER FLAT WEEK
The table captures the movement of Nifty 50 index in the week to July 19, 2024.
Date | Open | High | Low | Close |
19-Jul-24 | 24,853.80 | 24,854.80 | 24,508.15 | 24,530.90 |
18-Jul-24 | 24,543.80 | 24,837.75 | 24,504.45 | 24,800.85 |
17-Jul-24 | 24,615.90 | 24,661.25 | 24,587.65 | 24,613.00 |
16-Jul-24 | 24,615.90 | 24,661.25 | 24,587.65 | 24,613.00 |
15-Jul-24 | 24,587.60 | 24,635.05 | 24,522.75 | 24,586.70 |
12-Jul-24 | 24,387.95 | 24,592.20 | 24,331.15 | 24,502.15 |
Weekly Returns | +0.12% |
Data Source: NSE
For the sixth week in a row, the FPI flows at $1,845 Million were very supportive of the Nifty. Now total FPI flows have totalled $8.65 Billion into equities in 6 weeks. For the week, the Nifty closed with gains of just 0.12% as the gains of IT sector, FMCG were neutralized by oil & gas and metals. The VIX, bounced marginally in the week to 14.83 levels; which means, the Nifty still remains buy-on-dips index. For the week, the Nifty gained a total of 29 points. During the week, the Nifty touched a high of 24,855 and a low of 24,504, eventually closing the week just above the 24,500 mark. Nifty is already in unchartered territory.
NIFTY NEXT 50 INDEX – TAKES IT HARD ON THE CHIN
The table captures the movement of Nifty Next 50 for the week to July 19, 2024.
Date | Open | High | Low | Close |
19-Jul-24 | 73,047.85 | 73,059.60 | 71,246.90 | 71,353.00 |
18-Jul-24 | 73,906.25 | 73,943.35 | 72,648.05 | 73,112.50 |
17-Jul-24 | 74,612.45 | 74,715.60 | 73,807.50 | 73,921.70 |
16-Jul-24 | 74,612.45 | 74,715.60 | 73,807.50 | 73,921.70 |
15-Jul-24 | 74,053.00 | 74,430.95 | 73,744.65 | 74,367.35 |
12-Jul-24 | 74,322.40 | 74,453.30 | 73,424.40 | 73,732.10 |
Weekly Returns | -3.23% |
Data Source: NSE
In a week when the Nifty and the Sensex closed flat, the Nifty Next 50 really took it on the chin. That can be attributed to selected stocks in the defence and PSUs, which bore the brunt of the mid-cap and small cap fall. The index closed the week with deep losses of -3.23%, in sharp contrast to the Nifty and the Sensex. This week, the Nifty Next 50 touched a high of 74,716 level and a low of 71,247, before closing the week at 71,353. For the week as a whole, the Nifty Next 50 index lost -2,379 points, largely because its mainstay sectors of defence and PSU stocks were deep in the red during the week.
NIFTY MID-CAP 100 INDEX – MID-CAPS ALSO FACE DEEP CUTS
The table captures the movement of Nifty Mid-Cap 100 in the week to July 19, 2024.
Date | Open | High | Low | Close |
19-Jul-24 | 57,069.75 | 57,069.75 | 55,788.10 | 55,908.30 |
18-Jul-24 | 57,618.30 | 57,629.75 | 56,693.95 | 57,111.10 |
17-Jul-24 | 57,866.65 | 57,909.85 | 57,560.50 | 57,664.00 |
16-Jul-24 | 57,866.65 | 57,909.85 | 57,560.50 | 57,664.00 |
15-Jul-24 | 57,431.55 | 57,687.65 | 56,985.90 | 57,664.45 |
12-Jul-24 | 57,408.60 | 57,412.80 | 57,004.05 | 57,173.80 |
Weekly Returns | -2.21% |
Data Source: NSE
In the previous 4 weeks, the mid-cap index had closed with gains of 350 bps, but corrected sharply by -221 bps in the latest week to July 19, 2024. During the week, the advance / decline ratio turned decisively negative and that went against these mid-cap stocks. During the week, the Mid-Cap 100 index touched a high of 57,910 and a low of 55,788. Unlike the previous week, when the index closed the week near its high, this week, the index closed very close to its weekly lows.
NIFTY SMALL-CAP 100 INDEX – IT WAS NOT SPARED EITHER
The table captures movement of Nifty Small Cap 100 in the week to July 19, 2024.
Date | Open | High | Low | Close |
19-Jul-24 | 18,831.15 | 18,835.95 | 18,367.50 | 18,397.75 |
18-Jul-24 | 19,094.00 | 19,098.60 | 18,720.85 | 18,829.20 |
17-Jul-24 | 19,111.20 | 19,180.10 | 19,024.90 | 19,062.40 |
16-Jul-24 | 19,111.20 | 19,180.10 | 19,024.90 | 19,062.40 |
15-Jul-24 | 19,045.10 | 19,087.60 | 18,853.85 | 19,047.70 |
12-Jul-24 | 19,009.50 | 19,069.50 | 18,902.20 | 18,949.05 |
Weekly Returns | -2.91% |
Data Source: NSE
The week showed alpha clearly taking a backseat in the markets. The small cap index had gained about 400 bps in the last 3 weeks, so some normalization was expected. This week, the index of small caps closed with deep losses of -2.91%; almost neutralizing the gains of the previous 3 weeks. For the week, the Nifty Small Cap index lost -551 points. During the week, the index touched a high of 19,180 levels and a low of 18,368, with most of the selling happening in the last two days of the week. It is a sign that retail investors are still a bit cautious about small caps at this stage.
BANK NIFTY INDEX – FLAT BANKS HOLD THE MARKETS
The table below captures the movement of BANKNIFTY in the week to July 19, 2024.
Date | Open | High | Low | Close |
19-Jul-24 | 52,531.55 | 52,586.75 | 52,146.30 | 52,265.60 |
18-Jul-24 | 52,215.05 | 52,782.75 | 52,168.65 | 52,620.70 |
17-Jul-24 | 52,466.70 | 52,619.05 | 52,331.60 | 52,396.80 |
16-Jul-24 | 52,466.70 | 52,619.05 | 52,331.60 | 52,396.80 |
15-Jul-24 | 52,330.05 | 52,662.25 | 52,154.00 | 52,455.90 |
12-Jul-24 | 52,272.65 | 52,794.55 | 52,171.15 | 52,278.90 |
Weekly Returns | -0.03% |
Data Source: NSE
Bank Nifty closed the week just -7 points lower for the week to July 19, 2024. In recent weeks, the banking party was spoilt by the negative news flows in heavyweights like HDFC Bank and Kotak Bank. Higher inflation expectations also impacted banking stocks negatively at a macro level. While the higher CPI inflation may hold back the RBI from cutting rates, the higher than expected WPI inflation may provide the impetus for rate cuts. During the week, the Bank Nifty touched a high of 52,783 and a low of 52,146.
NIFTY IT INDEX – WEAK RUPEE AND INFY RESULTS BOOST IT INDEX
The table captures the movement of Nifty IT index in the week to July 19, 2024.
Date | Open | High | Low | Close |
19-Jul-24 | 40,682.70 | 40,682.70 | 39,833.10 | 39,923.30 |
18-Jul-24 | 39,010.35 | 40,075.70 | 39,010.35 | 40,010.40 |
17-Jul-24 | 39,013.75 | 39,280.00 | 38,730.55 | 39,141.50 |
16-Jul-24 | 39,013.75 | 39,280.00 | 38,730.55 | 39,141.50 |
15-Jul-24 | 39,432.10 | 39,567.00 | 38,831.65 | 38,911.35 |
12-Jul-24 | 37,917.35 | 39,237.70 | 37,825.25 | 39,023.00 |
Weekly Returns | +2.31% |
Data Source: NSE
If the previous week was about TCS, this week was about a strong performance and robust guidance by Infosys. After gaining 12.5% in the previous 4 weeks, the latest week saw the IT index surge another 2.31% on the back of a weak rupee. Infosys not only reported higher profits and 100 bps better EBIT margins, but also raised the constant currency (CC) revenue growth guidance to 3-4%. The gains in IT stocks were supported by a strong dollar as the IT companies offer a natural hedge against rupee weakness. The Nifty IT index closed with weekly gains of 900 points. For the week, Nifty IT index touched a high of 40,683 and a low of 38,731. IT has been the consistent star among large caps for 5 weeks in a row.
NIFTY OIL & GAS INDEX – RELIANCE COMES UNDER PRESSURE
The table captures the Nifty Oil & Gas index for the week to July 19, 2024.
Date | Open | High | Low | Close |
19-Jul-24 | 13,110.05 | 13,112.00 | 12,712.90 | 12,729.90 |
18-Jul-24 | 13,118.95 | 13,152.50 | 12,953.65 | 13,094.35 |
17-Jul-24 | 13,123.65 | 13,194.45 | 13,072.60 | 13,090.45 |
16-Jul-24 | 13,123.65 | 13,194.45 | 13,072.60 | 13,090.45 |
15-Jul-24 | 12,917.20 | 13,124.95 | 12,864.50 | 13,111.60 |
12-Jul-24 | 12,852.15 | 12,916.20 | 12,720.40 | 12,855.50 |
Weekly Returns | -0.98% |
Data Source: NSE
After gaining 8.3% in the previous 3 weeks, it was a return to reality for oil & gas stocks. The surge was largely led by Reliance Industries coming under pressure. However, the oil & gas story seems to be intact. The robust crude prices is helping the upstream and refining stocks with a promise of better gross refining margins (GRMs). The Oil & Gas index was down -126 points as some profit taking was visible in oil & gas stocks. The Oil & Gas index touched a high of 13,194 and a low of 12,713 levels in the week.
NIFTY AUTO INDEX – HIGHER INFLATION A HEADWIND
The table captures the movement of Nifty Auto index in the week to July 19, 2024.
Date | Open | High | Low | Close |
19-Jul-24 | 25,573.90 | 25,573.90 | 24,931.25 | 24,963.35 |
18-Jul-24 | 25,457.40 | 25,605.50 | 25,162.70 | 25,576.70 |
17-Jul-24 | 25,510.25 | 25,587.85 | 25,430.95 | 25,482.90 |
16-Jul-24 | 25,510.25 | 25,587.85 | 25,430.95 | 25,482.90 |
15-Jul-24 | 25,235.70 | 25,451.10 | 25,191.15 | 25,419.80 |
12-Jul-24 | 25,246.40 | 25,301.40 | 25,102.40 | 25,145.45 |
Weekly Returns | -0.72% |
Data Source: NSE
Auto stocks have been under pressure for some time now. After losing -1.00% last week, the auto index lost another -0.72% this week as higher inflation expectations and higher input costs spooked auto stocks. Auto leaders like Tata Motors and M&M are taking price cuts. While rural demand is likely to get a boost this time, input costs and the challenge to pass on costs remains the key issue. For the week, the Auto Index made a high of 25,606 and a low of 24,931; closing 182 points lower for the week.
NIFTY FMCG INDEX – ON AN INCREDIBLE ROLL
The table captures the movement of Nifty FMCG index in the week to July 19, 2024.
Date | Open | High | Low | Close |
19-Jul-24 | 61,286.45 | 61,491.40 | 60,840.45 | 61,087.90 |
18-Jul-24 | 60,482.45 | 61,281.40 | 60,416.25 | 61,225.35 |
17-Jul-24 | 60,144.25 | 60,875.15 | 60,004.00 | 60,645.15 |
16-Jul-24 | 60,144.25 | 60,875.15 | 60,004.00 | 60,645.15 |
15-Jul-24 | 59,805.15 | 60,141.25 | 59,603.20 | 60,070.70 |
12-Jul-24 | 59,576.70 | 59,885.40 | 59,414.85 | 59,725.75 |
Weekly Returns | +2.28% |
Data Source: NSE
In the last 2 weeks, the Nifty FMCG Index rallied 5.25%, but that was not all. This week, the index rallied another 2.28%; adding up to a 7.6% rally in just 3 weeks, something you do not normally get to see in the FMCG index. The trigger was a hint from a CRISIL report that there could be a sharp revival in rural demand, with the demand rally expected in double digits. Once again, the FMCG index was the top performer in the week. The index gained a jaw-dropping 1,362 points this week. During the week, the FMCG index touched a high of 61,491 and a low of 59,603. The FMCG index touched its lifetime high during the current week.
In summary, if the previous week was about the large cap narrative outshining the smaller stocks; this week was about intense pressure in non-Nifty stocks. Alpha hunting has taken a back seat; at least till the Union Budget. However, in the Indian stock markets, retail enthusiasm and the passion for smaller stocks are never too far away!
Related Tags
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Capital Services Support WhatsApp Number
+91 9892691696
IIFL Capital Services Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
ARN NO : 47791 (AMFI Registered Mutual Fund Distributor)
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.