The benchmark indices, despite a strong rebound since April 8 following the tariff pause by US President Trump, have not seen a market-wide participation from all sectors, with over 25 out of nearly 30 thematic indices still trailing frontline gauges when it comes to retesting their respective all-time highs.
After a correction that began in September 2024, both Sensex and Nifty have rebounded by nearly 11 percent, and are just 4 percent below their respective 52-week highs.
The Nifty Bank and Nifty Private Bank indices have outperformed since April 8, reaching a level just 1.3 percent short of all-time highs, while the Nifty Defence and Nifty Tourism indices are within 3 percent of record highs. However, some sectors remain significant laggards.
The Nifty Media index is 27 percent below its 52-week high, while Nifty Realty and Nifty Energy are down 24 percent and 23 percent, respectively. The Nifty PSU, Nifty Microcap 250, and Nifty IT indices too remain 20 percent, 18 percent, and 17 percent below their respective recent highs.
Other key indices such as Nifty Oil & Gas, Auto, FMCG, and Pharma too are lagging by 12-18 percent off their 52-week highs. Among broader market benchmarks, the Nifty Midcap 100 and Nifty Smallcap 100 are down by 15 percent and 10 percent, respectively.
Analysts say that sectors such as metals, energy, auto and real estate saw limited participation in the rally due to concerns over a potential weakness in global economic recovery, despite a temporary pause in tariffs. The IT sector underperformed, weighed down by US recession fears, soft earnings expectations, brokerage downgrades and the impact of tariffs. However, with recent easing in trade tensions between the US and China, analysts expect some relief for these sectors going forward.
The recent rally has largely been driven by foreign institutional investors who have been net buyers for last 16 consecutive sessions, injecting over $6 billion into Indian equities. Investor sentiment has also been buoyed by hopes of Ukraine truce talks and easing geopolitical tensions between India and Pakistan after a ceasefire.
The optimism was further fuelled by hopes of progress in trade talks between the United States and China, after they agreed to a 90-day tariff pause and lowered levies by a 115 basis points. Early-stage peace talks between Russia and Ukraine in Istanbul too helped temper global risk concerns.
Read More: After Monday's rally, experts are looking hard for fresh cues to power near-term gains
In a recent interview with Moneycontrol, Anil Rego of Right Horizons PMS said he sees Indian private banks as attractively valued. Despite robust fundamentals - including strong capital adequacy, improving asset quality, and solid credit growth - many largecap private banks are still trading below historical Price-to-Book averages. Their recent underperformance, relative to the broader market, has widened the valuation gap thus offering a compelling risk-reward opportunity for long-term investors. Macro tailwinds such as rising domestic consumption, ongoing capital expenditure, and a likely peak in interest rates further enhance their growth potential.
On defense stocks, Rego said he sees long-term promise, supported by government spend on modernization, growing export opportunities, and a policy focus on innovation and self-reliance. These factors are expected to sustain demand for Indian defense companies well into the next decade.
Commenting on technical outlook, Hrishikesh Yedve, AVP - Technical and Derivatives Research at Asit C Mehta Investment Intermediates, said, “If the index sustains above 24,850, it could test 25,200 in the short term and 25,500–25,800 in the medium term. Traders should adopt a buy-on-dips approach as long as the index holds above 24,850 on a closing basis.”
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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