This shows the rally has not been broad-based.

At a time the Bombay Stock Exchange (BSE) Sensex is racing towards its earlier peak, more than half the stocks in the broader BSE 500 Index are trading 30 per cent below their all-time highs.

Taking into account on Wednesday’s close of 19,502.11, the Sensex is still 8.03 per cent, or 1,704.66 points, away from its all-time high of 21,206.77 hit on January 10, 2008. Among the 30 Sensex stocks, eight hit new highs on Wednesday, while SBI traded near its peak.

But, most of the remaining 21 Sensex stocks are quite short of their peaks. For example, Reliance Communications, which closed at Rs 162 on BSE on Wednesday, is nearly 80 per cent below its peak of Rs 844. Others such as DLF, Jaiprakash Associates, Wipro and Reliance Infrastructure are 50-75 per cent from their all-time highs, data compiled by the BS Research Bureau show.

In the BSE 500 Index, which represents nearly 93 per cent of the total market capitalisation of Asia’s oldest stock exchange, 31 stocks hit all-time highs on Wednesday and 88 stocks closed 10 per cent below their peak levels. A total of 176 stocks closed more than 50 per cent below their all-time highs. A few stocks like Himachal Futuristic, Cals Refineries, NOCIL, KGN Industries, Tanla Solutions and Subex were more than 90 per cent off their peaks.

The BSE 500 Index, which closed at 7,842.14 on Wednesday, is about 13 per cent below its all-time high of 8,991.42 achieved on January 8, 2008.

This indicates the market rally has not been broad-based. With the valuation gap between largecap and midcap stocks widening, investors have started moving to the latter. “Since largecap stocks are trading at peak valuations, investors have started shifting to quality midcaps,” said Anil Bhattar, president, equity at Mumbai-based Kantilal Chhaganlal Securities.

However, experts caution that there is no margin of safety at these levels and chasing midcap stocks may be risky. “Investors are better off putting money in largecap stocks in sectors like infrastructure, capital goods and engineering that are still relatively cheap,” said Ajay Parmar, head of research, institutional equities, Emkay Global Financial Services.

source: Business Standard

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