The gap in the year-to-date returns of the leading benchmark indices, Nifty and Sensex, has started to decline in the recent past. While the 50-share Nifty has put on 13% so far in 2012, the 30-share Sensex has managed to generate 12% in the period. This difference stood at 0.9% on Friday, its lowest since May 9,2012. Earlier in March, this difference had reached its three-year high of 2.4%.
The primary reason for fading disparity, could be the higher number of stocks that constitute the Nifty compared with Sensex, resulting into wider representation from the banking, infrastructure and metals space which have lead the market declines since mid-August.
All together the 20 shares that are not present in the Sensex have accounted for 31 points or nearly one third of the Nifty’s 1.8% decline since the third week of August while aiding about 17% of its 600 points of year to date gains.
For example, five stocks from banking and financial space including Axis Bank, IDFC, and Punjab National Bank, Kotak Mahindra Bank and Bank of Baroda have together accounted for about a fifth of the Nifty?s decline in since August 10. Axis bank, in particular has emerged as one of the biggest loser amongst these stocks and which does not form Sensex.
Similarly, seven of the infra and construction stocks ( including DLF) that are not part of the Sensex have worsened the Nifty?s performance by nearly 12 points in in the period. Sesa Goa and SAIL, two of the metals sector representatives in the Nifty have also erased 5% from the index in last four weeks.
For the year to date performance however, higher weights attached to some of the leading bluechips in the Sensex compared to the Nifty have aided the former. These common constituents include the top five gainers including ITC, HDFC Bank, ICICI Bank, L & T and Reliance Industries that have awarded 80% of the Sensex?s year to date gains of 1858 points against 65% to the Nifty?s 601 points of gains in the period.
Notwithstanding this catching-up, 2012 would be the second in the last three years when the Sensex has lagged behind the Nifty in yearly performance.
Earlier in 2010, the Nifty yielded 0.5% higher than the Sensex. However, since 1995, the Sensex has outperformed the Nifty 9 times barring 2011 when both the indices lost similar 24.6%.