Nifty at 21k: IT, media languish as all other indices scale new highs

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All sectoral indices except Nifty IT and Media have climbed to new highs in the past few sessions, Bloomberg data shows. The Nifty IT is more than 18 percent away from its all-time high and media 34 percent.

On December 8, the Nifty hit the 21,000-mark for first time ever as Reserve Bank of India kept repo rate unchanged for the fifth time. The central bank raised its GDP growth forecast for the financial year 2023-24 by a huge 50 basis points to 7 percent following the big upside surprise in the July-September data. The Nifty closed at 20,969.

According to analysts, cooling crude prices, the status quo on interest rates, softening yields, better-than-expected GDP number and anticipated political stability are the reasons for the broader momentum. This is reflected in sectoral indices such as autos and realty that closed near life-time highs.

Meanwhile, IT and media stocks continue to languish due to sector-specific reasons. Nifty IT's lifetime high was hit in January 2022, media did it in 2018.

Also Read: 19 stocks in Nifty 50 index hit lifetime high as RBI keeps repo rate unchanged

IT companies are facing weak demand outlook due to cost-cutting measure take by clients in the West. The Street believes the tough macro conditions are likely to continue, resulting in muted demand from major verticals.

In its IT services report, Kotak said most enterprises were focused on cost reduction and the trends didn’t indicate the possibility of recovery in discretionary spending in H1 CY24.

Elara Capital said verticals such as like BFSI, retail and manufacturing continued to be in a slump.

The main reason for Nifty Media's underperformance is the large weightage of Zee Entertainment Enterprises. The stock was under pressure in the first half of the year amid insolvency battle. The stock has recovered some lost ground and is now up 6 percent for the year.

Also Read: Bank Nifty hits 47,170, clocks biggest weekly gain since July 2022

Analysts say the good run of Nifty Auto and Nifty Realty will continue despite higher-for-longer repo rate keeping auto and home loans elevated. This is because demand in both segments is being driven by premium customers, with luxury flats, SUVs and 250cc+ two-wheeler sales taking centre stage.

Nifty Realty has gained 68.7 percent this year and the Nifty Auto is up 40 from the previous year. Nifty Infra about is up 32 percent, Nifty FMCG 22 percent and Nifty Bank 9 percent.

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