Nifty 500’s 1,000-Point Rally Has Been Lopsided

Large-cap stocks in the Nifty 50 index accounted for close to three-fourths of the jump in the broader index since the previous low on Oct. 26 last year till March 13, contributing nearly 720 points. The remaining 450 accounted for 280 points. That’s almost equivalent to the contribution of just three Nifty 50 heavyweights—Reliance Industries Ltd., HDFC Bank Ltd. and ICICI Bank Ltd.

While Nifty 500 rose 12.3 percent during the period, 57 percent (or 285) stocks lagged the index, returning less than 8 percent gains.

Similarly, about 60 percent of the Nifty Smallcap Index constituents under-performed compared with 14.3 percent rise in the benchmark for small-sized companies. Mid caps fared better with 56 percent of the members rising more than the benchmark.

Weakness In Broader Market

Of the 500 stocks, 279 are trading below the 200-day moving average—a key resistance level in technical analysis—reflecting a weakness in the broader market. Also, more than half of the constituents of the Nifty Midcap 100 Index and Nifty Smallcap 100 Index are trading below their 200-day moving average levels.

Not Cheap

Nifty Midcap 100 Index is trading at 16 times its one-year forward earnings and the small-cap benchmark is trading at 14 times. Both are trading at or close to their five- and 10-year average. And, NSE 500 is trading higher than its historical valuations, suggesting that stocks are still costlier than long-term average.