Nifty is at an all-time high, but the gains so far this year have come from very few stocks. As per a Mint story dated 24 July 2018, 55% of Nifty’s market capitalisation increase between 23 March (when Nifty touched this year’s low) up to 20 July, came from three stocks by market cap; 39% of Nifty’s market cap increase came from the next seven stocks by market cap. But equity funds en- masse underperformed in the past year. How do you reconcile these two factors?
First of all, whenever the market takes a turn, usually there has to be a leadership that has to come from the segment or stocks that had done well. All of last year when mid-cap and small-cap gave returns of 50%, large-caps were not participating at all. Now when the markets started turning because of positive (earnings) results, then there was a sudden change in allocation and a lot of capital was pulled out of these (small- and mid-caps).
