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The decade-old dominance of the financial sector in the Nifty index has slowly been petering out. According to a study by Motilal Oswal Financial Services, the weightage of the banking, financial services and insurance (BFSI) sector, which has gained a secular dominance in the Nifty-50 index — from 22.7 per cent in December 2009 to 42 per cent in December 2019 — has slipped to a three-year low of 33.9 per cent. However, BFSI is still the largest contributing sector in the index.
“The recent correction post the Covid-19 crisis has impacted financials disproportionately given the economy-wide lockdown since the past seven weeks and its potential direct as well as indirect ramifications for loan growth, asset quality and moratorium impact,” said Motilal Oswal.
BFSI’s loss has been the gain of defensive sectors such as consumer, technology, pharma and telecom. “While financials’ weight expanded from 35 per cent in December 2017 to 42 per cent in December 2019, concurrently, three out of seven stocks added in the benchmark were from the consumer space (Titan, Britannia and Nestle) in the same period,” it added.
Reliance: Telecom or oil?
Oil and gas (O&G) has seen a large increase in the weightage, thanks to the huge out-performance of Reliance Industries. The sector’s weightage has gained 310 bps since December 2019 to 15.6 per cent of Nifty.
“Interestingly, a large part of the rally in Reliance has been led by developments in telecom, RJio. After the series of investments from multiple entities in Jio Platforms over the last three weeks, the company is now moving toward becoming debt free. In fact, RJio now constitutes 50 per cent of RIL’s SOTP (sum-of-the-parts valuation),” it said.
The consumer goods sector’s weight has inched up consistently over the last three years and now stands at 12.7 per cent (9.2 per cent in December 2017). This is despite ITC’s sharp underperformance in the last five years.
Healthcare has seen some revival in its fortunes. After an elongated period of underperformance since 2015, the pandemic has renewed the sector’s prospects with healthcare being the best performer in the last two months. Consequently, its weightage has jumped from 2 per cent in December 2019 to 3.3 per cent now. However, it’s still well below the 7 per cent weight that it enjoyed in 2015.
Those going strong
Out of the 50 stocks in Nifty, 24 have been part of the index since the last 15 years. Of these 24, four each are from auto, oil and technology, two each from private banks, consumer, metals and healthcare and one each from NBFC, capital goods, PSU banks and telecom, the Motilal Oswal study revealed.
Stock-wise rankings within Nifty over the last 15 years throw up interesting changes. HDFC Bank and Sun Pharma have seen the maximum improvement in their rankings, moving up from the 18th and 31st positions 15 years ago to 2nd and 19th positions now, respectively.
HDFC, which was at the 12th position, has climbed up to the 3rd position now. ONGC, which was ranked 1st then, has now slipped to the 30th rank.
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