Broader markets outperform in a longer time frame

Mumbai: Indian shares’ surge to historic highs has been accompanied by criticism that the rally is not real as it does not have broad market participation. While the Sensex and the Nifty have climbed to life highs, the midand small-cap indices are still well below their peaks. This is most certainly true especially if you look at the data since February this year.

The Nifty and the Sensex have gained 2.75 per cent and 4.4 per cent, respectively, between February 1 and July 30 thanks to performance of select stocks like HDFC, HDFC Bank, TCS, Reliance Industries and Hindustan Unilever. Sectoral indices are sharply lower.

But if you look closely at the numbers, the picture is very different and it doesnt look as if broader markets have not participated at all in the rally.


Lets take market performance from March 1, 2016, when the markets reversed after the sharp losses of 2015 after the Union Budget of that year. The Nifty is up 56.73 per cent since then, but the Nifty Midcap 100 is up 59 per cent. The BSE Sensex is up 57.68 per cent since then, but the exchange’s mid- and small-cap indices have climbed well over 60 per cent since then. So, market rally from the lows from the near-two-year lows of February 2016 has been pretty broadbased. The accompanying table gives more details.

The same performance is repeated if you examine data from 2013, 2010 and 2008.

The Nifty and the Sensex are up about 343 per cent since 2008. The BSE mid and small cap indices are up 451 per cent and 388 per cent. Nifty Auto has gained 1,024 per cent in this period, while Nifty IT has delivered a 552 per cent gain. Short-term underperformance of the broader market should not obscure its long-term outperformance especially when it has been sustained for a decade.