Markets are at a 3 year high and TV Channels and newspapers were screaming about the same over the weekend. There is a term which has been coined by me from the famous ‘TGIF’ Thank God it’s Friday to ‘FFFF’ Friday Feel Fine Factor. Markets went berserk and just zoomed. The US deal involving raising the debt limit was responsible for this rally. It was aided by aggressive buying by FII’s who pumped in almost 300 million dollars in a single day or about Rs 1,750 crs. Is it correct to say that the markets are at a three year high? I believe the benchmark indices like the SENSEX and NIFTY are but not the market. The market is far from it and there are sectors and not just stocks which are at values which are at half or less than a third of their January 2008 values. In many cases they are even lower.
The sectors which have done well in the last five years are FMCG, Healthcare, Auto and IT. The sectors which have done badly are Realty, Power, Metal, Capital goods and PSU. The BSEMIDCAP index is 42% away from its January 2008 peak trading currently at 5,900 against 10,250. The BSESMALLCAP is at 5,750 against the high of 14.250, a difference of just about 60%, Realty has been reduced to a mere 10% of its highs of 2008. DLF traded at 1225 and is now at 157.
In individual stocks it is ITC up from 100 to 350, Hindustan Lever up from 200 to 600 and TCS up from 435 to 2,120 who have contributed to the current levels being reached again. Infosys has done well in the last couple of quarters and has moved from 1500 to 3300 in the same period. On the losing side Tata Steel has fallen from 715 to 328 while Reliance has fallen from1240 to 910.
| Oct-13 | Apr-08 | |||
| SENSEX | 20882.89 | 21206.77 | -323.88 | -1.53 |
| NIFTY | 6189.35 | 6357.10 | -167.75 | -2.64 |
| BSE100 | 6155.33 | 6643.86 | -488.53 | -7.35 |
| BSE200 | 2444.50 | 2776.96 | -332.46 | -11.97 |
| BSE500 | 7505.41 | 8991.42 | -1486.01 | -16.53 |
| BSEMIDCAP | 5895.23 | 10245.81 | -4350.58 | -42.46 |
| BSESMALLCAP | 5737.88 | 14239.24 | -8501.36 | -59.70 |
| BSE AUTO | 11930.36 | 5796.87 | 6133.49 | 105.81 |
| BSE BANKEX | 12254.23 | 12678.98 | -424.75 | -3.35 |
| BSE CAP GOODS | 8428.72 | 20410.74 | -11982.02 | -58.70 |
| BSE CON DURBLE | 5920.31 | 7119.69 | -1199.38 | -16.85 |
| BSE FMCG | 6994.48 | 2569.72 | 4424.76 | 172.19 |
| BSE HEALTHCARE | 9747.20 | 4485.33 | 5261.87 | 117.31 |
| BSE IT | 8546.81 | 4530.91 | 4015.90 | 88.63 |
| BSE METAL | 9017.87 | 20494.62 | -11476.75 | -56.00 |
| BSE OIL GAS | 8815.85 | 10705.20 | -1889.35 | -17.65 |
| BSE POWER | 1569.35 | 4929.34 | -3359.99 | -68.16 |
| BSE PSU | 5592.81 | 11205.38 | -5612.57 | -50.09 |
| BSE REALTY | 1353.31 | 13848.09 | -12494.78 | -90.23 |
| BSE TECK | 4835.36 | 4023.07 | 812.29 | 20.19 |
From the table above one can see how individual sectors have fared. Very clearly what is brought out is the fact that besides the sectors the rally is currently very narrow and if it is to sustain or go forward and continue it must percolate to the broader market. For illustration purpose the SENSEX is now 1.5% away while the BSE100 is 7.35% away. The BSE200 is 11.97% away and the BSE500 is a good 16.53% away.
The benchmark indices have rallied but the market has yet to rally. Currently there is poor interest in the markets and the ‘left out feeling’ is just not there. For the next part of the rally one needs this participation, this feeling to creep in otherwise this could be just another rally. One needs to remember that fundamentals are just not supporting the market and it could be a couple of quarters away when the growth story is talked about and becomes the key driver for the market.
Liquidity is the only driver and the US crisis being pushed to January end gives the markets three additional months along with the comfort that tapering of ‘QE’ will certainly not happen till then. Be selective in the market and only invest where conviction and the company’s performance speaks for itself.