says in a note, have benefited from the consumption boom and government policies, while IT and pharma have received support from the recovery in the global economy and weakening domestic currency. All this at a time when the GDP growth rate has fallen from sub-9 per cent in FY’08 to 5 per cent in FY’13. Crisil Research expects FY’14 GDP growth to be at a moderate 5.5 per cent.
Along with reconstitution of the Nifty, the concentration of top-10 stocks too has changed — it is at a five-year high of around59.1 per cent weightage currently, compared to 53.3 per cent in January 2008. Further, six companies among the top 10 of 2008 have now been replaced. The polarisation towards a few sectors and among the top 10 stocks, though, signifies increasing risk aversion among investors.
“While the consumption and export-linked sectors have provided resilience to the index, Crisil believes that policy impetus towards investment-linked sectors is now critical for any sustainable uptick to the markets at large.”
This was a view echoed by investment bank Goldman Sachs, which on August 3 downgraded Indian stocks to ‘underweight’ and recommended investors to stay selective on concerns of economic growth recovery. “The investment case for India has turned less favourable... We see further earning cuts and limited room for re-rating. We downgrade India to underweight and recommend investors to stay selective,” the bank said in a research report. The report, however, favours export-facing sectors, strong balance sheet companies and thematic alpha trades.
The problem with investment-led sectors taking a hit is that huge capital investments in energy, mining, have got struck in various stages of development. Delay in infrastructure development has led to the challenges for the banking system, where banks are facing rise in delinquency rates and in non-performing loans. Some of the mid-size public sectors banks’ problems have risen to such gravity where it is looking that the net worth may take a bigger knock.
Now the operative question for investors is what to buy in case of sign of bottoming out and where to seek shelter in case the situation were to