Nifty Hits Fresh Record High; Sensex Up Over 330 Points

After opening the day on a positive note, stock markets in India continued their momentum and went on to scale their record-high levels. Sectoral indices are trading on a positive note with stocks in the energy sector and capital goods sector witnessing maximum buying interest.

The BSE Sensex is trading up 337 points (up 0.9%). The NSE Nifty hit a new record high of 11,560 and is presently trading up 87 points (up 0.8%). The BSE Mid Cap index is trading up by 0.9%, while the BSE Small Cap index is trading up by 0.4%.

The rupee is trading at 69.71 to the US$.

Speaking of rising markets, note that the BSE Sensex is up by around 21% 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.

The 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:

Sensex Return Skewed by Top 12 Stocks

What has led to this divergence?

As Girish Shetty, Research Analyst at Equitymaster, writes in a recent issue of The 5 Minute WrapUp…

Corporate governance issues at mid and small cap companies have led to their corrections from sky high valuations a year ago.

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 other news, Gitanjali Gems share price, Panoramic Universal share price, and Amtek Auto share price are witnessing selling pressure today. The scrips of these stocks hit their lower circuit limits after NSE and BSE announced that they will suspend trading in these firms from September 10.