Nifty at 24,000 – Which stocks were the major drivers?

1 Jul 2024 , 08:47 PM

NIFTY AT 24,000; KNOW THE STOCKS THAT FLATTERED

The month of June was a kind of game changer for the market. Political stability was back, the new government was formed, VIX came back to normal levels and the FPI flows are back with a vengeance. In the last 3 weeks, it is the FPIs that have infused close to $4.96 Billion into equities. We are not even counting the FPI infusion into debt. Incidentally, as of the close of the first half of 2024, nearly 96% of the total net flows from FPIs is in the form of debt flows and only the balance 4% is in the form of equity flows. However, there is a broader significance to the equity story here.

Debt flow from FPIs in this year are largely on the back of expectations of the Indian bonds being included in the JP Morgan Bond Index. That alone, is likely to bring in global passive debt money to the tune of $30 Billion and FPIs are buying in anticipation of that buying. What is significant about equity flows is that the domestic flows have been strong, and despite the tentative flows from the FPIs, the Nifty and Sensex continue to trade at lifetime highs. As we close June 2024, Nifty has crossed the 24,000 mark and the Sensex has crossed the 79,000 mark. The indices are already in uncharted territory, so any further up-move would be largely based on momentum and news flows. Let us look at the key drivers among the large caps in this Nifty journey to 24,000 in terms returns, resilience, and swing factor.

LET US START WITH THE MOMENTUM 1-MONTH RETURNS

We start with the short term momentum story; i.e., the stocks that generated the best returns in the last one month among the large caps. As the Nifty scaled the peak of 24,000 by the end of June, the Nifty index as a whole was up a healthy 5.75% in June. Out of the 50 stocks in the Nifty 50 index, 40 stocks gave positive returns and 10 gave negative returns in the last month. Here is a ranking of the top stocks in terms of 1-month returns,.

Stock Symbol	Market Price	1-Month Return	1-Year Return	52-week High	52-week Low	Bounce from Low	Distance to High
SHRIRAMFIN	2,921.00	22.61%	71.16%	3,059.45	1,689.15	72.93%	4.74%
ULTRACEMCO	11,650.50	16.41%	41.25%	11,874.95	7,987.65	45.86%	1.93%
WIPRO	513.80	14.21%	34.88%	545.90	375.05	37.00%	6.25%
M&M	2,866.45	13.14%	105.49%	3,013.50	1,390.15	106.20%	5.13%
HDFCBANK	1,685.00	11.64%	0.46%	1,757.50	1,363.55	23.57%	4.30%
GRASIM	2,668.00	11.24%	53.20%	2,678.95	1,730.75	54.15%	0.41%
TECHM	1,429.60	11.19%	29.08%	1,453.00	1,082.30	32.09%	1.64%
LTIM	5,380.00	10.33%	5.82%	6,442.00	4,513.55	19.20%	19.74%
AXISBANK	1,263.80	9.10%	29.34%	1,310.00	927.15	36.31%	3.66%
ICICIBANK	1,197.25	8.86%	27.96%	1,235.00	899.00	33.18%	3.15%

Data Source: NSE

What are the sectors that are showing momentum over the last one month? The momentum clearly appears to be in favour of the financials which dominate the top monthly gainers on the Nifty. Out of the top 10 stocks by 1-month returns, 4 are financial stocks, 3 are technology stocks and there are 2 commodity stocks from the same business group; Ultratech and Grasim. Unlike previous such analysis, there is just one auto stock (M&M) in the list of top gainers. At the bottom, you have the profit booking candidates like Maruti Suzuki, Coal India, Adani Enterprises, L&T, Hindalco etc. The top 10 stocks gave an average monthly return of 12.87% while the top 20 stocks gave average monthly returns of 9.82% for the last one month. The bounce was prominent in IT and financials.

STOCKS THAT LED NIFTY TO 24,000 IN LAST 1 YEAR

One month returns may give a momentum perspective, but not a fundamental perspective. For that, we turn to the full year returns as the Nifty traversed to the 24,000 levels. Here are the top performers for the last one year. Nifty index generated annual returns of 26.56%. Out of the 50 stocks in the Nifty 50 index, 45 stocks gave positive returns and only 5 stocks gave negative returns in last one year. The table below captures the top-10 Nifty stocks ranked on returns over last one year.

Stock Symbol	Market Price	1-Month Return	1-Year Return	52-week High	52-week Low	Bounce from Low	Distance to High
COALINDIA	473.50	-2.73%	108.21%	527.40	224.15	111.24%	11.38%
M&M	2,866.45	13.14%	105.49%	3,013.50	1,390.15	106.20%	5.13%
BAJAJ-AUTO	9,505.00	4.76%	101.46%	10,038.80	4,541.00	109.32%	5.62%
NTPC	379.50	3.77%	100.08%	393.20	184.75	105.41%	3.61%
HEROMOTOCO	5,590.00	8.47%	97.25%	5,894.55	2,795.00	100.00%	5.45%
ADANIPORTS	1,475.00	4.83%	95.39%	1,621.40	708.00	108.33%	9.93%
ONGC	274.35	0.86%	72.94%	292.95	156.55	75.25%	6.78%
SHRIRAMFIN	2,921.00	22.61%	71.16%	3,059.45	1,689.15	72.93%	4.74%
TATAMOTORS	989.20	4.89%	68.71%	1,065.60	575.50	71.89%	7.72%
BHARTIARTL	1,449.00	4.86%	65.56%	1,536.25	847.05	71.06%	6.02%

Data Source: NSE

What are the sectors that emerged leaders in the last one year as the Nifty journeyed to 24,000? The momentum was with auto stocks and PSU stocks. In the top-10 list, by 1-year returns, there were 4 Auto stocks (M&M, Bajaj Auto, Hero Moto, and Tata Motors), and 3 PSU stocks (Coal India, NTPC, and ONGC). Of the other 3 stocks, Adani Ports was a story of the group revival, while Shriram Finance a play on the group merger. Bharti Airtel, one of the top performing telecom plays in the last one year, has moved sharply up in the market cap rankings this year. Based on annual returns, 4 stocks generated more than 100%, while 13 stocks generated more than 50% returns. A total of 27 of the 50 Nifty companies outperformed the Nifty index returns; although the thrust came from autos and PSUs.

How about the laggards on a 1-year basis. There were 5 stocks that gave negative returns for FY24 with only Asian Paints showing double-digit losses. Kotak Bank was in the bottom list due to the RBI ban impact. There were 3 FMCG companies at the bottom viz., ITC, Hindustan Unilever, and Asian Paints. Here the challenge appears to be a slowing of rural demand as well as the downstream impact of high crude oil prices. In fact, the stocks at the bottom were largely dominated by financials and FMCG stocks.

HOW RESILIENT WERE NIFTY STOCKS AS THE INDEX TOUCHED 24,000

How do we measure resilience of a stock. One way to measure resilience is the extent of bounce in the stock from 52-week lows. That may not be precise, but it is a good approximation of a resilience in the stock. Here we rank the stocks on how much the Nifty stocks bounced from their respective 52-week lows. For Nifty, as a whole, the bounce from the low of the year was 27.46%. Out of the 50 stocks in the Nifty 50 index, 6 stocks bounced more than 100% from the lows, while 17 stocks bounced more than 50% from the lows and a total of 34 stocks showed more resilience than the Nifty index. The theme of resilience may correspond with the annual gainers, although there are often some differences.

Stock Symbol	Market Price	1-Month Return	1-Year Return	52-week High	52-week Low	Bounce from Low	Distance to High
COALINDIA	473.50	-2.73%	108.21%	527.40	224.15	111.24%	11.38%
BAJAJ-AUTO	9,505.00	4.76%	101.46%	10,038.80	4,541.00	109.32%	5.62%
ADANIPORTS	1,475.00	4.83%	95.39%	1,621.40	708.00	108.33%	9.93%
M&M	2,866.45	13.14%	105.49%	3,013.50	1,390.15	106.20%	5.13%
NTPC	379.50	3.77%	100.08%	393.20	184.75	105.41%	3.61%
HEROMOTOCO	5,590.00	8.47%	97.25%	5,894.55	2,795.00	100.00%	5.45%
POWERGRID	331.30	4.17%	32.30%	348.70	177.53	86.62%	5.25%
BPCL	303.25	-52.02%	-16.82%	343.98	165.73	82.98%	13.43%
ONGC	274.35	0.86%	72.94%	292.95	156.55	75.25%	6.78%
SHRIRAMFIN	2,921.00	22.61%	71.16%	3,059.45	1,689.15	72.93%	4.74%

Data Source: NSE

What are the sectors that are showing resilience in terms of bounce from the 52-week lows. The top 10 stocks by resilience are dominated PSU stocks and auto stocks. In fact, there are 5 PSU stocks in the top-10 and 3 auto stocks in this list. The two stocks from outside this group are Adani Ports and Shriram Finance. Gains in auto stocks was a mix of volumes, margin, and EV related triggers; while PSU stocks benefited from the government policy to open up a more critical role for PSUs; especially in defence, power, and hydrocarbons.

What is the story of the laggards in the Nifty in terms of the lowest bounce from the 52-week lows? There were 2 stocks that have bounced less than 10% from the lows of the year and 5 stocks bouncing less than 15% from the lows. It is once again dominated by the FMCG players and the financials. That means, they are still very close to their lows and that is a sign of weakness at a time when the Nifty and the Sensex are at lifetime highs. Among the laggards were; Bajaj Finserv, IndusInd Bank, Asian Paints, Hindustan Unilever, and ITC.

SWING STORY – HOW CLOSE ARE NIFTY STOCKS TO YEARLY HIGHS?

One way to measure if the market swing is favouring the stock is to see how close the stocks are to their yearly highs. Here we ranking from the lowest to the highest. Especially, at a time when the Nifty is at 24,000, this becomes a very important show of strength. What are the companies that are able to resist selling pressure at higher levels? The closer the stock is to the year highs, the stronger is the swing factor. In fact, the Nifty index itself is just about 0.68% short of the 52-week high. Out of the 50 stocks in the Nifty 50 index, 14 stocks are less than 5% away from their 52-week highs, while a total of 33 stocks are less than 10% away from their 52-week highs. Clearly, there is a volatility impact in last one month.

Stock Symbol	Market Price	1-Month Return	1-Year Return	52-week High	52-week Low	Bounce from Low	Distance to High
GRASIM	2,668.00	11.24%	53.20%	2,678.95	1,730.75	54.15%	0.41%
DIVISLAB	4,599.00	3.34%	27.62%	4,648.45	3,295.30	39.56%	1.08%
RELIANCE	3,128.25	8.65%	23.77%	3,162.00	2,220.30	40.89%	1.08%
TECHM	1,429.60	11.19%	29.08%	1,453.00	1,082.30	32.09%	1.64%
JSWSTEEL	934.10	3.28%	18.90%	949.40	723.00	29.20%	1.64%
DRREDDY	6,400.00	6.69%	25.34%	6,505.90	5,004.35	27.89%	1.65%
ULTRACEMCO	11,650.50	16.41%	41.25%	11,874.95	7,987.65	45.86%	1.93%
ICICIBANK	1,197.25	8.86%	27.96%	1,235.00	899.00	33.18%	3.15%
HINDALCO	691.95	-1.67%	65.05%	715.25	414.65	66.88%	3.37%
NTPC	379.50	3.77%	100.08%	393.20	184.75	105.41%	3.61%

Data Source: NSE

In this ranking, you find companies like Grasim, Divi’s Labs, Reliance Industries, Ultratech and Reddy Labs. That is what makes this test unique as it also gives weight to companies that are close to their highs, irrespective of returns. Here the top-10 list still has a strong dominance of commodities with 5 commodity plays and two major pharma stocks in this list that have managed to buck the trend. Unlike the previous lists, this list finds more of stock specific stories rather than just sector level stories. That is why swing or the proximity to the high, gives a refreshingly different perspective to the Nifty rally.

What is the story of the laggards in the Nifty in terms of proximity to the 52-week highs. There are 9 stocks that are more than 15% away from their 52-week highs while there are 17 stocks that are more than 10% away from the highs. The list includes familiar names from the financial, IT and FMCG sector.

CONVICTION INDEX: WHAT ARE THE COMMON FACTORS?

One way to check the conviction of outperformance, is to look at stocks that outperform on multiple parameters. Here we looking at momentum in term of 1-month returns, fundamentals in terms of 1-year returns, resilience in terms of bounce from lows and swing in terms of proximity to the highs. Here is what we are reading from the data.

• Commodity stocks are suddenly turning in a stellar performance in the last one year. These commodity stocks are across a varied range but appear to be scoring on all the four counts measured above.
• Auto stocks which were the dominant force across categories, are now visible largely in the long term returns and the resilience category. Sharp correction at higher levels ahs seen them give up their highs. That story is true of most of the PSUs too.
• Pharma makes a surprise appearance in the last of the conviction list, which is the swing factor. That could be a foreboding of things to come.

While heavyweights threw their weight behind the index, PSUs continue to dominate returns. But it is the bounce in stocks like Reliance, ICICI Bank and HDFC Bank that has actually made a big difference to the Nifty index.