Nifty up 16% YTD; Mid, small-caps outperform largecaps in last 5 years; L&T, PNB Housing, others among top picks

The NSE Nifty 50 benchmark is up 16.1 per cent in CY24 year-to-date (YTD) driven by resilient investor sentiments, constant domestic inflows, and robust macroeconomic fundamentals. Over the last 12 months, the domestically focused mid-caps and small caps have gained 52 per cent and 58 per cent, respectively, while the blue-chip large caps have risen 31 per cent. 

According to domestic brokerage Motilal Oswal Financial Services, midcaps have outperformed large caps by 150 per cent during the last five years, while small caps have outperformed large caps by 126 per cent.

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In its best winning streak since its launch in 1996, the NSE Nifty 50 rose 83.95 points or 0.33 per cent to hit a new lifetime closing high of 25,235.90 last Friday. This took its victorious run to the 12th consecutive session, its longest-ever rally —a streak not seen in 31 years. The benchmark then rose for the first two sessions again this week before taking a breather on Tuesday.

The Nifty 50 index touched a fresh high of 25,268 before ending +1.1 per cent month-on-month (MoM) at 25,236 in August 24. The index has closed higher for the third straight month now. Notably, the index was extremely volatile and swung around 1,375 points before closing 285 points higher.

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What's behind Nifty 50's winning streak in 2024? Here are three key factors

1.FII, DIIs inflows

Foreign institutional investors (FIIs) turned buyers for the third consecutive month in August, while domestic domestic institutional investors (DII) inflows remained strong at $5.8 billion in August. FII inflows into Indian equities stand at $5.1 billion in CY24YTD compared to $21.4 billion in CY23. DII inflows into equities in CY24YTD continue to be strong at $37 billion compared to $22.3 billion in CY23.

2.Breadth favorable in August 2024: 

Among sectors, Healthcare (+seven per cent), Technology (+five per cent), Telecom (+two per cent), Consumer (+two per cent), and Financial (+one per cent) were the only gainers. In contrast, PSU Banks (-six per cent), Real Estate (-four per cent), Capital Goods (-three per cent), Utilities (-two per cent), and Media (-two per cent) were the key laggards month-on-month (MoM). 

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3.Major economies end higher in August 2024

Among the key global markets, Brazil, Indonesia, the US, MSCI EM, India ended higher in local currency terms. Over the last 12 months, the MSCI India Index (+40 per cent) has significantly outperformed the MSCI EM Index (+12 per cent). Over the last 10 years, the MSCI India Index has notably outperformed the MSCI EM index by a robust 205 per cent.

Nifty 50 earnings outlook

In Q1FY25, earnings for the Nifty 50 rose four per cent year-on-year (YoY). The aggregate performance was hit by a drag from oil marketing companies (OMCs). Over the past five years, the Nifty 50 has delivered returns at 17 per cent CAGR, supported by equally impressive corporate earnings CAGR of 18 per cent. ‘’We expect earnings momentum to sustain; albeit, the magnitude of its growth is expected to moderate to ~15 per cent over FY24-26,'' said Motilal Oswal.

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Here are Motilal Oswal's top stock picks:

Among large caps, the brokerage's top picks are ICICI Bank, SBI, HUL, L&T, HCL Tech, M&M, Coal India, Titan, Hindalco, and Mankind Pharma

The brokerage's top picks among midcaps and small caps are Indian Hotels, Godrej Properties, Ashok Leyland, Persistent System, Kaylan Jewellers, KEI Industries, Metro Brands, PNB Housing, Cello World, and Angel One.

Stock market today

The frontline indices of the Indian stock market, the Sensex and the Nifty 50, ended in negative territory on Wednesday, September 4, on profit booking in shares of select heavyweights such as ICICI Bank, Infosys, and Larsen and Toubro (L&T) amid weak global cues.

Eventually, the 30-share pack Sensex closed 203 points, or 0.25 per cent, lower at 82,352.64, with 19 stocks in the red. The Nifty 50 closed with a loss of 81 points, or 0.32 per cent, at 25,198.70, with 31 stocks in the red. The BSE Midcap index also declined by 0.12 per cent, but the Smallcap index bucked the trend, rising 0.32 per cent.

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‘'After gaining in the last two weeks, markets saw a decline amid global concerns. However, buying at lower levels indicates the resilience of domestic equities in the face of global volatility. We expect Nifty to consolidate at a higher zone with intermittent volatility as key US economic data are lined up. Defensive sectors like FMCG and pharma to remain in focus,'' said Siddhartha Khemka, Head - Research, Wealth Management, Motilal Oswal Financial Services Ltd.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.