Nifty, after giving low single-digit returns in 2018, has gained momentum in 2019. The index has already rallied about 10 percent so far in the year to touch a record high of 12,103 earlier in the week.
It took Nifty nearly a year to complete its journey from 11,000 to 12,000. The index closed over 12,000 level for the first time on June 3. It had closed above 11,000 level for the first time on July 12, 2018.
Since July 12, Nifty has gained 9 percent. But, there are 134 stocks in Nifty500 universe that have outperformed Nifty in the same time frame; 21 of them rising 50-160 percent.
These include Axis Bank, Titan Company, Bata India, UPL, Power Finance Corporation, Info Edge, Praj Industries among others.
In fact, three stocks—Vinati Organics, Balrampur Chini and Adani Power—have more than doubled their investors' wealth in the same period.
Table 1: 21 Nifty500 stocks that gave over 50 percent returns during the time Nifty travelled from 11,000 to 12,000.
The primary reason for their rise could be the election outcome which saw Narendra Modi coming back to the power for a second term as the Prime Minister, suggest experts. His victory means the government can push its reform agenda focusing on agriculture, infrastructure development and increasing household income.
“Nifty has been moving higher since it revisited 11,100 in the third week of May this year. The Nifty has so far added 1,000 points or roughly 9 percent since then, which has resulted in it hitting a lifetime high value,” Jateen Trivedi of Bonanza Portfolio Ltd told Moneycontrol.
“A strong show in the general election 2019 by the ruling NDA has been a key driver of the current rally. Adding to that, falling crude oil price helped inflation to be lower. Now, market participants are expecting dovish stance in the coming monetary policy review by RBI,” he said.
Among the Nifty stocks that outperformed the index include Kotak Mahindra Bank, BPCL, HCL Tech, Infosys, L&T, RIL, State Bank of India, Wipro, Bajaj Finance, ICICI Bank, Titan Company, UPL among others.
Table 2: 21 Nifty stocks that outperformed the benchmark during the time it travelled from 11,000 to 12,000.
Way Forward:
Nifty is likely to hit more fresh highs in 2019 on continuity of reforms, as well as bounceback in earnings growth which has remained elusive for some time now.
The liquidity from foreign investors is likely to continue on political stability and the prospects of economic growth, which is still comparatively better among emerging markets.
We are in a structural bull market phase which will continue for a long time, and the index could be in the range of 13,000-15,000 in the next 1-2 years.
"We set our June 2020 target for BSE Sensex at 45,000 and Nifty at 13,500, an upside of 15 percent from here," Morgan Stanley said in a note.
The brokerage said the risks for equities are mostly global—crude oil, US Fed and US-China trade tension, "but our call assumes resolution to the ongoing strain in the financial sector via liquidity infusion and continuing fiscal discipline.”
Axis Capital also said strong public investment push over the next two years without any speed breakers like demonetisation can propel Nifty to 15,000. If not, we see markets hovering closer to mid-cycle valuations with Nifty at 12,400, it added.
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