The year 2019 saw continued polarisation of the markets in terms of volumes and market cap.
The benchmark Nifty50 has rallied 12% in 2019, despite several domestic and global issues that plagued financial markets. Towards the close of the year, Nifty50 has hit multiple new highs, but nearly half of the index constituents will end the year in the red.
Only those investors that focused on top ten stocks would end the year in the green, as the broader markets continue to struggle.
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The year 2019 saw continued polarisation of the markets in terms of volumes and market cap. While the Nifty50 rallied about 1,400 points or nearly 12%, five stocks — Reliance Industries (RIL), ICICI Bank, HDFC Bank, HDFC and Kotak Mahindra Bank — contributed over 80% to the total gains of the index.
The largest company by market value, Reliance Industries, added the most in market capitalisation during the year. Shares of RIL jumped 38% during the year, adding Rs 2.7 lakh crore to its market cap. Currently it is the only company in India that saw its market cap touch the 10 lakh-crore mark. To put this into perspective, there are only nine companies on BSE with a market capitalisation of at least Rs 3 lakh crore and four them belong to the banking sector.
While the market capitalisation of HDFC Bank increased by Rs 1.33 lakh crore, Tata Consultancy Services (TCS), ICICI Bank and Bharti Airtel also saw their market value surging somewhere between `1.08 lakh crore and Rs 1.24 lakh crore during the year.
With much of corporate India battling slowing demand, financial institutions stood out as the outliers as they were the biggest beneficiaries of the corporate tax cuts announced by the finance minister in September 2019. Private lenders have seen their stocks rise as the rally in quality stocks continued. Credit Suisse believes, the concentration of stock performance may increase in the first half of 2020. “We expect narrow market performance to continue for now, as economic uncertainty continues to push funds into the “safe” stocks, resulting in higher market concentration.”
Market performance in the coming year though would be affected by how FY22 earnings per share (EPS) moves. “We expect this too to settle at a low to mid-teens growth on the reduced FY21 base,” the foreign brokerage said in a note.
In the last one year through November 2019, of the 1,500 stocks traded on NSE, 800 stocks lost more than 20% whereas Nifty is up about 12%. The share price of 92 stocks fell below Rs 10 during the same period. Market participants believe the narrow rally in headline indices may continue at least for another six months.
As investors favoured safety and quality along with earnings visibility, stronger firms continued to become stronger. As a result, the 25 of Nifty constituents, which are trading in the green have together added Rs 14.2 lakh crore in 2019 and their combined market capitalisation has grown as big as 46% of the broader BSE500 index. The broader BSE-500 index accounts for about 93% of the total country’s market capitalisation, representing all 20 major industries of the economy.