In the last one year, BSE Sensex has gained close to 3,000 points as it raced higher from the 16,600 level recorded last July. But, if you didn’t own ITC and Hindustan Unilever, the returns will not look as great.

Over a third of the index’s 3,000-point rally since July last has been contributed by just two FMCG heavyweights, which gained 40 per cent. While ITC contributed 723 points to the rise, Hindustan Unilever has chipped in with 247 points. Another 800 points came from Infosys and Tata Consultancy Services.

With much of corporate India struggling to deliver any profit growth, FMCG companies that have managed some growth and offer predictable profits have emerged as investors’ favourites. IT stocks have also been favoured for their likely gains from a strong dollar.

The market rally in the last one year has been quite narrow. Testimony to this is the fact that in the Sensex pack itself, there are 12 stocks that languish below last year prices. Coal India, BHEL, Sterlite Industries, Tata Steel and Jindal Steel and Power are in fact down 20-50 per cent. Even in the BSE-500 index, only stocks from defensive sectors, including FMCG, pharma and consumer durables, have moved higher in this period, leaving many stocks in the lurch.

Who backed the rally?

The stocks that have given the most returns in the period seem to have rallied on the back of foreign institutional investor buying. In the case of ITC, FIIs have increased their holding in this stock from 17.7 per cent in June 2012 to 19.6 per cent now. Similarly, Hindustan Unilever, Infosys, Tata Consultancy Services and Sun Pharma too have seen the foreign institutions increase stake. Dr Reddy’s Laboratories was the most favourite stock of the FIIs, seeing an eight percentage point increase in foreign institutional holding to 32.7 per cent from 25.8 per cent in June 2012. This stock has rallied 42 per cent in the last one year.

Retail investors have, however, exercised caution and cashed out.

In Hindustan Unilever retail holding stands at 13.4 per cent now, down from 14 per cent in June 2012. In Infosys, retail investor holding has fallen to 11.3 per cent from 12.8 per cent a year earlier.

(This article was published on July 28, 2013)
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