Manufacturing companies have been outperformers on the bourses in the current year, leading to a rise in their weighting in the benchmark index, a report by Business Standard stated.
As per the report, companies in sectors such as FMCG, automobile, pharmaceuticals, metals, cement, and agrochemicals now account for 25.43 percent of the Nifty50 index, up 88 basis points from 24.55 percent at the end of December last year and a record low of 23.1 percent at the end of CY20.
The manufacturing sector is now dominated by FMCG majors such as Hindustan Unilever, ITC, Asian Paints, Nestle, and Britannia, accounting for 45 percent of the combined market cap of all manufacturing companies in the index, it added.
It is followed by automakers with 21.4 percent and pharma companies with 12.7 percent of the combined market capitalisation of manufacturing companies, further noted the report.
"However, despite its outperformance in CY22, manufacturing companies have been on the losing side on a longer-term basis and their weighting in the index has declined steadily in the past decade. The sector weighting in the index is still more than a fourth lower than their decade-high weighting of 34.9 percent at the end of December 2012," informed the report.
Meanwhile, the recent outperformance of the manufacturing sector in CY22 has been attributed to a rally in automobile and FMCG stocks.
“Automakers and FMCG companies have benefited from a decline in energy and commodity prices. A decline in input prices has boosted their margins and earnings, fuelling a rally in their share price,” said Dhananjay Sinha, director and co-head (institutional equities and research), Systematix Institutional Research. He expects the rally to continue for a few more quarters.
The combined market capitalisation of manufacturing companies that are part of the Nifty 50 index is up 7.6 percent year-to-date compared to a 6.6 percent rise in the combined market capitalisation of all Nifty 50 companies.