Even though the equity markets staged a sharp rebound from March lows, data shows that the number of stocks hitting their respective 52-week lows in April significantly outnumbered the number of counters hitting their 52-week highs.
Data from ACE Equity shows that there were around 114 stocks from the NSE 500 that hit their 52-week highs in April, while 170 stocks touched their 52-week lows. This divergence, experts believe, highlights a consolidation of market interest around a few well-capitalised and earnings-resilient names.
Investors are increasingly shifting their focus towards large-cap and high-quality mid-cap stocks, amidst market volatility, data reveals. While on May 5 market breadth climbed to its highest since April 21, the rally remains narrow, revealing a selective bias favouring fundamentally strong and liquid companies. Benchmarks have recovered steadily in April following a sharp correction from late September 2024.
“Most likely this shows that retail is selling since many new investors have seen a sustained downturn for the first time and are probably exiting loss making positions. This might be the reason for 52-week lows,” said Vikas Gupta, CEO & Chief investment Strategist, Omniscience Capital.
Gupta added that the FIIs and DIIs or other savvy investors are buying the larger more liquid firms which could be making 52-week highs. "Investors will continue buying high quality growing companies which are available at discounts to their intrinsic values. And selling will continue in weak overvalued stocks," he said.
Macroeconomic tailwinds such as a softer US dollar and crude prices, alongside improving clarity on global tariffs, have contributed to the rebound in benchmark indices, according to Nirav Karkera, Head of Research at Fisdom who adds that the rally is expected to remain narrow.
“There is a narrative which is working in favour of India, where India is clearly going to be less impacted than most of its Asian, South Asian and emerging market peers,” Karkera said adding that this is not a broad-based rally. "It is largely narrow with a lot of bias towards relatively larger companies and stronger balance sheets and high quality of earnings and quality earnings growth," he added.
Sectors drawing strong institutional interest include financials, consumer staples, and telecom, with capital flowing disproportionately into bellwether names and larger mid-caps that exhibit resilient earnings. According to Karkera, even among mid-caps, the relatively larger, stronger ones are getting a lot of investor interest from FII and DII alike.
Sunny Agrawal, Head of Fundamental Research at SBI Securities adds that this shift marks the end of the post-COVID speculative phase, when nearly every stock participated in the market rally. “Post September 24, because of the slowdown in the earnings as well as the global uncertainty, we have seen the markets have been separating men from boys,” he said. Ultimately, he added, the market is now shifting from weaker fundamental companies to the companies which are relatively immune to the recent ongoing slowdown narrative.
Agrawal highlighted that investors are now focused on earnings visibility while selecting stocks instead of on market cap. “Ultimately, it is a profit growth which will drive this stock price. Companies which are likely to deliver healthy growth will find a buyer at every dip.”
While concerns over global risks ranging from geopolitical tensions to the Trump tariffs continue to influence market sentiment, experts agree the current market structure should continue to favour larger, fundamentally robust players over the next few months.
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