In the market rout this year, the BSE Sensex has been fallen by a lower extent compared with the NSE’s Nifty. On a year-to-date basis, the S&P BSE Sensex is down 8.5 per cent while CNX Nifty has corrected by 11 per cent. Nifty’s underperformance follows higher weightage for banking stocks and more holdings in the cement and realty space. Sample this:
CNX Nifty started the year with a weight of 29 per cent for banking and finance companies. Of the 650-point drop by the index so far this year, banking stocks contributed 500 points.
Also, with JP Associates, DLF, ACC, Grasim Industries, UltraTech Cement and Ambuja Cements falling 25-60 per cent this year, Nifty has been a clear loser.
The BSE Sensex, on the other hand, had no representation from the cement pack.
Lag inrecovery too
Market observers, however, feel, in case the market bounces back, Nifty could be slower to recover due to banks and rate-sensitive sectors.. Banks are facing a margin squeeze on increase in cost of funds while rate sensitives such as automobiles, realty and cement could suffer due to firm interest rates. Currently, Nifty has a total weight of 12 per cent in these three sectors while banks contribute 25 per cent to its weightate. BSE Sensex doesn’t hold any stock from the realty or cement space. Its exposure to banking stocks is at a lower 22 per cent and weight on information technology stocks is higher at 19.8 per cent (versus 16.5 per cent of Nifty).
Earnings projections in Bloomberg show that Nifty may see earnings growth of around 8 per cent for FY-14 versus 11 per cent projected for Sensex basket companies, thanks mainly to IT companies.