color="#0260a8">Infosysand Wipro emerged as the biggest gainers while Sesa Goa, Jindal Steel and BHEL remain at the bottom of the table.
The trend has been on similar lines since 2008. A look into the performance of Sensex companies since beginning of 2008 reveals that companies in metal, power, capital goods and oil & gas have been clear losers while IT, Pharma, FMCG and auto have generated substantial returns for investors in the same period.
As a result of the same there has also been a notable change in the pecking order of Sensex companies. While NTPC, ICICI Bank, BHEL, SBI and L&T do not figure in the top 10 companies by market capitalisation now, they have been replaced ITC Ltd, HDFC Bank, Hindustan Unilever (HUL), Wipro and HDFC Ltd.
What does it signify?
The company’s financial performance remains key to a stock’s performance and stock markets track future earning of companies. While earning expectation for companies in the power, metal and infrastructure sector remained weak and deteriorated over the last few years, the situation has not witnessed any improvement even now.
“The forward earning expectation for power, infrastructure and metal companies has shown no improvement and the growth has been coming from companies in the IT, pharma and FMCG sectors as they have sustained their earning growth,” said Rikesh Parikh, VP, market strategy and equities at Motilal Oswal Financial Services.
Market participants expect that IT, pharma and FMCG to continue with their performance in the current environment of slow growth and uncertainty.
“While IT companies benefit from an uptick in the US economy and depreciation in rupee, FMCG and pharma, being defensive sectors, will not see a slowdown in growth even as the economy slows,” said Alex Mathew, head of research at Geojit BNP Paribas Financial Services.
So does that mean you should stay away from power, infrastructure and metal companies?
Things are uncertain now and so even as most of the stocks within these sectors are available at significantly low valuations experts are not yet sure whether they have bottomed out.
While metal prices are flat, government has not come out with any clear visibility on infrastructure and power projects. Several projects may have received approvals over the last few days by the Cabinet Committee on Investments, experts feel that it may still take some time for them to come