Stock markets in India have continued their momentum and are presently trading on a positive note. Sectoral indices are trading on a positive note with stocks in the realty sector and banking sector witnessing maximum buying interest.
The BSE Sensex is trading up 137 points (up 0.4%), while the NSE Nifty is presently trading up 23 points (up 0.2%). The BSE Mid Cap index is trading up by 0.4%, while the BSE Small Cap index is trading up by 0.2%.
The rupee is trading at 68.62 to the US$.
The Sensex hit its 38,000 level for the first time today and is presently trading at 38,024.
Note that the BSE Sensex is up by 11.4% in the current year.
But the real picture can’t be further from the truth. Only 12 stocks are responsible for Sensex touching their lifetime highs. TCS, Infosys, Reliance along with a few other stocks have led to this outperformance.
Sensex Return Skewed by Top 12 StocksThe top 12 stocks have returned 25.5% on an average while the other 19 stocks in the Index have declined by 12% on an average, as can be seen from the chart below:
What has led to this divergence?
As Girish Shetty, Research Analyst at Equitymaster, writes in a recent issue of The 5 Minute WrapUp…
Even among Sensex stocks, Tata Motors, Vedanta, and Bharti Airtel have performed poorly due to structural issues in their businesses.
What happens when these top 12 stocks fail to meet the market’s expectations?
Well, there’s a possibility they might take down the other 19 stocks and the index further with them. In such a situation, despite the recent correction, mid and small caps won’t be safe either.
In the news from global financial markets, China’s annual consumer inflation rate accelerated to 2.1% in July, beating market expectations. The rise here was largely driven by a rise in non-food prices.
