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Charts & Analysis

Election Fever: Auto, Pharma, IT Stocks Outperform Nifty; Metal, Realty Stocks Underwhelm

The markets have seen quite some euphoria over the last few months. Since May this year, the Nifty has been hitting unprecedented levels, touching an all-time high of 8173.9 at the close of the day of 8th September.

Nifty_Oct 23

Ever since Election results came out in May, the markets seem to have taken very kindly to the mandate. The Sensex too saw an all-time high on the same day, hitting 27,354.99.

Since the Nifty is representative of all the industries put together, it would be interesting to see, sector-wise, which industries have seen maximum upswing during this period, and which have under-performed. Some sectors seem to have reacted very positively to the arrival of a new government at the centre, while others have under-whelmed. We do this by comparing the Nifty to other industry-specific indices (e.g. CNX Midcap, CNX Energy, CNX Pharma and so on).

Since we’re interested in the movement of the shares since Election Results day, we tweak our analysis slightly. Taking the levels of each of the indices on May 16th as the baseline, we track the movement of the index-levels from these base values, on a daily basis. The results are quite surprising.

Nifty vs Midcap vs Smallcap

Nifty_Mid_Small

  • The Nifty hit its peak on the 8th of September.
  • The CNX Midcap hit its peak of a 25.9% increase, on the 15th of September.
  • The CNX Smallcap hit its peak of 29.9% on the 4th of July.

Small caps have actually been on a downtrend since July, while mid-caps and large caps rose all the way into September, and have fallen a little from their peak since.

Since small caps are usually the haunt of retail investors, and mid+large caps that of the institutions, the markets seem to have lost retail attention and become more institution- focused in the last three months.

Nifty vs Auto vs Banks

Nifty_Autos_Banks

  • The CNX Auto had shown its highest post-elections increase of 30.5% on September 22.
  • The CNX Bank on the other hand, suffered a few ups and downs. In fact, on the 11th of July, it had actually dropped by 2.7%.

Auto has outperformed massively, right from elections and currently beats the Nifty by more than 16 percentage points! Banks though have under-performed the Nifty since elections.

Nifty vs IT vs Metal

Nifty_IT_Metal

  • The CNX IT hit a peak of 26.4% on the 1st of October.
  • The CNX Metal hit its peak of 26.8% much earlier, on the 9th of June.

The Metal sector is currently up by a paltry 1.96%. The Metal sector seems to have performed in stark contrast to the Nifty. While the initial few months post elections saw the Nifty gain steadily, the Metals sector zoomed ahead, recording a tremendous 26.8% increase at one point (9th June). However, as the months went on, they started moving in a downwards trend, especially from early August onward. The Metals sector is currently lags the Nifty by more than 9 percentage points!

The IT sector on the other hand, has been seeing steady gains since May. Although IT stocks did fall off their peak slightly since late September, they still outperform the Nifty by a shade over 7 percentage points.

Nifty vs Pharma vs Realty

Nifty_05

  • Pharma stocks have outperformed the market. They showed an incredible 40.9% increase on the 30th of September.
  • The CNX Realty showed a maximum gain of 39.4% on the 9th of June.

Realty stocks have been performing very poorly of late. They had their highest increase ( a massive 39.4%) within a month of election results. However, ever since then, realty stocks have been tanking; they are currently at a loss of 7.8% compared to their baseline value.

The Pharma are among the best-performing stocks since the elections. Pharma stocks have been on the up since May, and they have performed much better than the Nifty. At one point in time (30th September), the CNX Pharma was at an astounding 40.9% increase! They have truly outshone the Nifty and the CNX Pharma is currently at 33.6% above its base value.

Our View:

The onset of a new government at the Center, coupled with the promise of a slew of game-changing policies has definitely improved sentiments in the market. The Nifty is currently at 8014.55 (End of Day 23rd October); an increase of 11.27% above its May 16 levels. However, based on our industry-wise analysis, it is fairly evident that some of the industries have performed differently as compared to the market.

  1. Midcap and Smallcap stocks have performed a lot better than the market (21.45% and 17.61% gains in the 5-month period since election results).
  2. Based on an industry-wise segregation, Auto, IT and Pharma stocks have by far outshone all the other industries owing to their robust performances.
  3. Banks have consistently under-performed the market, albeit by only a few basis points. However, there have been days where the sector has gone down.
  4. Metal and Realty stocks have performed quite poorly in the wake of election results. Realty stocks were also hit hard by the SEBI’s order on DF. The stocks see to have tanked even further once the order came through, showing a lack of investor appetite for such stocks.

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