Half-yearly review of market: Only 9 Nifty companies in red in H1; a look at top stocks, sectors and trends

The first half of 2023 (H12023) has been good for Indian markets. Despite strong headwinds in the form of aggressive rate hikes, banking sector turmoil, political & geopolitical events and credit warnings, the stock market made a steady move up to hit multiple record highs in June.

The benchmark Nifty50 gained 6 percent during H12023. However, the broader markets did much better than the benchmarks with the Nifty Midcap, and Smallcap gaining 13.5 percent and 11.4 percent, respectively. Consequently, overall market breadth was also strong.

The markets were negative for the first two months of the year, flat in March, and posted strong returns in the last three months (April, May, and June) to recoup the losses and hit new highs.

Though at present equity markets appear strong on the back of a resilient demand environment, easing geopolitical conditions, controlled inflationary pressures, and peaking interest rates, experts believe that the uncertainty levels continue to remain elevated. The confidence in the economic growth in the developed world remains low, while valuations seem to be discounting a strong economic recovery, they cautioned.

Stocks

Only 9 stocks in the Nifty50 index have given negative returns in the first half of the current calendar year 2023.

Among stocks, Adani Enterprises has shed the most, over 38 percent in the first half of 2023, followed by Infosys, which fell 11.5 percent and Hindalco, which lost 10 percent. Meanwhile, Adani Ports, Cipla, and UPL declined between 5 and 10 percent. SBI also lost 4.6 percent and Bajaj Finserv and Wipro shed less than half a percent each.

Among gainers, Tata Motors topped the list, rallying over 52 percent, followed by ITC, which advanced almost 40 percent. Bajaj Auto, UltraTech Cement, Dr Reddy’s, L&T, M&M, PowerGrid, Titan, Britannia, Nestle and Maruti also rose over 15 percent each.

Overall, the rally was majorly driven by broader markets. Some Adani Group stocks and Zee Ent were notable losers on corporate governance concerns; while some mid and small-cap IT stocks were amongst the top performers for the period.

On the NSE500 index, almost 30 stocks rose over 50 percent each. Jindal Saw was the only multibagger, up 164 percent while Chennai Petroleum and GE T&D India soared over 90 percent each. Cyient, Zensar Tech, and Sonata Software also advanced between 75 and 87 percent.

Among losers, only 2 fell over 50 percent - Adani Transmission (70 percent) and Adani Green (50 percent). Meanwhile, City Union Bank, Zee, ACC, and Uflex shed over 25 percent each.

Sectors

However, even though the markets hit record high levels, the number of sectors underperforming the benchmark indices outnumbered the sectors outperforming. The rally was led by the rate-sensitive sectors like realty and auto; while energy and PSU banks were notable drags. Consumers and pharma also outperformed. IT services and financials were other notable underperformers.

Nifty Realty and Nifty Auto were the top sectoral performers, up over 20 percent each, followed by Nifty FMCG, which added 18 percent. Whereas Nifty Media lost the most, 12.5 percent and Nifty Metal, Nifty PSU Bank and Nifty Energy also lost between 4.5 and 7.6 percent.

Global markets

Emerging market equities underperformed developed markets – even though the developed markets have been facing serious growth challenges and financial sector stress. Indian equities also sharply underperformed the developed market and some emerging market peers like South Korea. However, it did better than BRICS peers and other emerging markets.

Japan's Nikkei was the best-performing global market, rising 29 percent, followed by KOSPI50, which advanced 20 percent. S&P500, Dax and CAC40 also gave double-digit returns in H12023. However, Shanghai, Hang Seng, and Brazil50 were among the indices that underperformed Indian markets.

FPI inflows

FPI inflows were positive for 4 of the 6 months in H12023. FPIs bought Indian equities worth ₹47,148 crore in the month of June, the highest in 10 months since August 2022. This is the fourth month of continuous inflows by foreign investors on the back of the country's steadily improving macroeconomic fundamentals.

FPIs invested ₹43,838 crore in May 2023, ₹11,631 crore in April and ₹7,936 crore in March. However, in the first 2 months of the current calendar year, FPI investments were in the red. They sold equities worth ₹28,852 crore in January and ₹5,294 crore in February.

Overall, in H12023, the FPIs have made inflows worth ₹76,406 crore.

Outlook: Let's see what experts have to say

Vinod Nair, Head of Research at Geojit Financial Services

Sentiments of investors are reinforced by positive domestic data and optimistic global cues. The global market was supported by resilient economic data, avoiding the possibility of a recession. India’s stock market trend was broad-based, owing to the outperformance from the energy, financial, metal, and FMCG sectors. Economic activities are gaining strength with PMI level enlarging to 57.8, indicating sustained demand for products, fostering a sense of confidence in the manufacturing prospects.

B&K

In the short term, markets can be significantly away from the fair value. Any change in the geopolitical situation, monetary policy stance and growth estimates will influence the near-term moves, but in the long-term, the returns should marginally be lower than the earnings growth. We believe that domestic oriented stocks especially in B2B sectors and in select consumer discretionary sectors will see good earnings growth. Also, export stories, which have a very low global market share will gain from China plus one and supply issues in the developed world. We move to Overweight on BFSI, industrials, consumer discretionary and Underweight on IT and materials.

Technical

Rupak De, Senior Technical analyst at LKP Securities

Nifty continues its upward movement with bulls at the helm despite selling pressure at higher levels. The trend remains bullish as the index sustained above the critical moving average. The current bullish trend is supported by a bullish crossover in the RSI momentum indicator. The support on the lower end is placed at 19200; while resistance is visible at the 19450-19500 zone.

Nagaraj Shetti, Technical Research Analyst, HDFC Securities

Though Nifty is placed at its all-time highs, there is no indication of any reversal building up at the higher levels. The crucial overhead resistance comes around 19500 and the next 19800 levels, which are 1.236 percent and 1.382 percent Fibonacci projections, taken from the bottom-top-bottom swings as per the weekly timeframe chart. Immediate support is at 19200 levels.