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MOSL: Morning India (27/September/19): 1. India Strategy (Revisiting the tale of divergence; Divergence within and outside Nifty continues); 2. Consumer Electricals; 3. Technology

MOrning India (27/September/19): 1. India Strategy (Revisiting the tale of divergence; Divergence within and outside Nifty continues); 2. Consumer Electricals; 3. Technology

 

Today’s top research theme

Strategy: Revisiting the tale of divergence; Divergence within and outside Nifty continues; presenting top Mid-cap bets

• The Indian government's big-bang measure of reducing the corporate tax rate has lifted market sentiment and resulted in a sharp rally subsequently. Nonetheless, from an index perspective, large-caps continue outperforming mid-caps.
• The Nifty has delivered 10% returns since Dec'17. However, this performance is largely driven by a group of top 15 Nifty stocks (66% of Nifty market cap), which are up by 30% over this period. The other 35 stocks are down by 15%. The divergence between these two groups is at 45%, up sharply from 33% in Mar'19.
• The Nifty Mid-cap 100 index is down by 22% since Dec'17. Here too it is the top-30 stocks (48% of CNX Mid-cap 100 market cap; -2% returns over the period) that are largely in favor. The other 70 constituents are down by a massive 29%.
• The trailing five-year return CAGR of the Nifty Mid-cap 100 dominated the Nifty returns by a healthy margin until 2017. Subsequently, given the continued underperformance of mid-caps, the gap has shrunk consistently and now virtually been bridged.
• TOP IDEAS: LARGE-CAPS: ICICI BANK, SBI, L&T, ULTRATECH, TITAN, EICHER MOTORS, ICICI PRU LIFE, BHARTI AIRTEL
• MID-CAPS: Indian Hotels, Federal Bank, MMFS, Ashok Leyland, PI Industries, ABFRL, JK Cement, Oberoi Realty, Colgate, Alkem Labs.

Piping hot news

Government wants oil cos to pay Rs 34,000 cr in dividend

The government wants oil companies to pay Rs 34,000 crore in dividend, profit petroleum and royalty in this financial year, about 15% more than they did last year, in a bid to raise resources for public spending amid economic slowdown and corporate tax cut.