Nifty 50 @ 7,387, yielding most of ‘Modi bounce’ gains

When Prime Minister Narendra Modi was sworn in as Prime Minister in May 2014, the Nifty 50 was at 7,359. Heightened expectations of stronger economic performance propelled the index to beyond 9,000 in March 2015, but barely 11 months after that ‘Modi bounce’ peak, on Monday it closed at 7,387, less than half a per cent higher than in May 2014.

Of course, the dismal performance of the index in recent months is rather more a reflection of global economic jitters and currency market volatility, but it is illustrative to look at it through the prism of domestic political milestones as well. The performance of the broad-based Nifty 500 was slightly better, with gains of 5.5 per cent over the same period. But it has been a rocky ride and the diversity in the performance of stocks within the index is quite stark.

Since the Modi government took charge at the Centre, 291 stocks from the Nifty 500 basket have posted gains. Of these, 69 stocks appreciated over 100 per cent, while 192 posted gains between 10 and 100 per cent. The remaining 30 posted gains in single digits.

The top five gainers are all multi-baggers, appreciating between 400 and 591 per cent. The biggest gainer is Welspun India, which appreciated a solid 591 per cent, followed by Visagar Polytex (541 per cent), followed very closely by Srikalahasti Pipes, earlier known as Lanco Industries. No sector-specific trends could be perceived in these multi-baggers.

On the losing side, 202 stocks lost value over this period. Of these, 60 lost more than 50 per cent. The 10 largest losers were from the steel, construction, auto ancillaries, realty, mining and power generation sectors. Bhushan Steel and JP Associates lost 90 per cent each. Amtek and Castex Technologies from the auto ancillaries sector lost over 80 per cent, while resource major Vedanta fell around 75 per cent. High debt, corporate governance issues and falling commodity prices pummelled their values.

Customer-driven industries such as apparel and textiles, ceramic and glass products, gems and jewellery, banking and finance; and foreign exchange earners such as IT, software education and pharma brought cheer to investors. Consumption themes such as autos, auto ancillaries, media, consumer durables, FMCG, packaging, logistics, hotels and restaurants also performed well.

Crude oil and natural gas and mining and materials stocks lost about half their value over this period.

The banking and finance sector had a dismal run. But companies with a rich and sustainable retail franchise were rewarded well — the top gainers being Bajaj Finance and CanFin Homes with returns of almost 230 per cent. With NPA issues arising out of corporate or retail stress, almost all public sector banks were hammered out of shape — Bank of India lost 69 per cent. Select private sector names such as ICICI and Mahindra Finance too were hit hard, losing around 29 per cent.

Pharmaceuticals performed better. Even after shrugging off regulatory scares, average gains were 83 per cent. IT-software also performed well, with average returns of 56 per cent. Tata Elxsi was the top-ranking IT stock in Nifty 500, up 316 per cent. Only three stocks in this segment lost in value, the biggest loser being Financial Technologies with a 61 per cent loss.

The performance of the pharma and IT-software stocks establishes that the market rewards companies that have strong attributes such as intellectual capital, management quality, low debt levels and good growth prospects. The sector indices behaved similarly. The Nifty Pharma Index, Nifty Media Index and Nifty IT Index were the top three gainers. The laggards were Nifty Metal Index, Nifty PSU Bank Index and Nifty Realty Index.

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