The month of May which started with pessimism amid rise in COVID cases created history as Nifty50 surpassed its earlier peak of 15,431 (on February 16) to hit a fresh record high of 15,469 on May 28.
The Nifty50 rallied 6.5 percent in May while the S&P BSE Sensex rose 6.4 percent. Sensex is still about a percent away from its record high. Meanwhile, broader indices, too, touched a record high in May.
At the start of the month, investors were cautious due to rising daily cases of coronavirus, which peaked around 4 lakh per day in early May.
Falling cases of Covid-19 in mid-May, pick up in vaccination drive, strong India Inc earnings and stable global cues boosted the sentiment on the Street.
“The Indian market had been underperforming owing to a sharp rise in COVID-19 cases. However, signs of peaking out of cases have led the markets to catch up with global peers which remain in buoyant mood,” Ajit Mishra, VP – Research, Religare Broking Ltd said.
“Globally, ramp up in vaccination and expectations of faster than expected economic recovery led to the rally,” he said.
In the NSE500 index, almost 60% of the stocks outperformed Nifty50 in May. As many as 193 stocks rallied 10-100 percent in a month. NSE500 represents the top 500 companies based on full market capitalization
Angel Broking more than doubled investor wealth in May as the stock rallied 104 percent after the brokerage firm’s net profit rose over 200 percent on a YoY basis to Rs 101 crore from Rs 30.89 crore reported in the year-ago aperiod.
“The share price of Angel Broking has been rallying after the firm registered the highest ever quarterly and yearly gross client addition of approximately 1 million and 2.4 million clients in Q4FY21 and FY21, respectively,” Gaurav Garg, Head of Research at CapitalVia Global Research said.
Also read: Best time for broking industry in 30 years – Angel Broking MD Dinesh Thakkar
“We expect the ongoing growth shall remain sustainable in the foreseeable future and therefore the prospects look optimistic,” he said.
Small & Midcap stocks remained on buyers’ radar as both indices hit fresh record highs in May. The Nifty Midcap 100 index outperformed Nifty as it rallied by about 7 percent while the Nifty Smallcap index closed with gains of 8 percent respectively for the month of May.
More small & midcap stocks made it to the list of stocks that rallied over 10 percent in the NSE500 index.
Out of 193 companies in Nifty500 index that rose over 10 percent in May, 12 of them rallied over 40 percent each that includes names like Adani Transmission, MMTC, BSE, HFCL, Lux Industries, and TCI Express.
Even as the second wave of covid has disrupted company operations, with more states imposing lockdown-like limitations to restrict mobility, small and midcaps have remained robust.
“Mid- and small-cap companies’ balance sheets are more leveraged than their large-cap counterparts. As a result, in a low-interest-rate environment, their profits are amplified,” says Garg of CapitalVia Global Research.
“Select midcap and small-cap companies with better financial records are expected to benefit more than the others now that the economy is projected to bounce back,” he said.
Sectors that were in limelight:
The top sectors that were on buyers’ radar were PSU Bank, Nifty Energy, Nifty Auto, and Nifty Realty indices were the top gainers in May.
Nifty PSU Bank rose 18 percent in May. Experts feel that the sector is back on investors’ radar because of attractive valuations as well as hopes of a pick up in credit cyccle.
“PSU valuations had gone really attractive with the fall in covid 1.0. Most of the companies were available at below 1 times price to book value. High liquidity results in value stocks outperforming and the same has resulted in the PSU rally,” Divam Sharma, Co-founder of Green Portfolio said.
The PSU bank stocks have been contributing to the benchmark index rally this year. Garg of CapitalVia Global Research explains that the corporate credit cycle is turning and there seems to be adequate capitalization which is helping this space gain traction.
“The divestment buzz and recapitalization plan has initially drawn investors’ interest which is now being supported by improving quarterly results,” he said.
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