“Commodities” is the most important buzzword in equity markets these days. Chartists, analysts, economists, strategists and traders et. al. are predominantly talking about stocks of commodity companies. The strong rally in the stocks of commodity producers is primarily based on the material rise in the global commodities’ prices, especially in past one year.
I analysed the market performance since announcement of first
lockdown (25h March 2020). I also looked at the market performance
in three other timeframes, viz.,
(i) Since January
2021, because most of the restrictions announced in March 2021 were lifted, US
elections were completed and vaccine launches had already begun.
(ii) Since February
2021, because a market exciting budget was presented with strong on infra
building and fiscal discipline; and UK exit from EU was complete, and global
trade had started to normalize.
(iii) Since April
2021, when a second wave of pandemic started to hit few states of India badly
The following are some of the key trends observed in the
performance of market in these time frames.
1. “Metals” have
been a clear outperforming sector over all timeframes. Nifty Metals has
returned 255% since Lockdown 1.0, more than double of the second best
performing sector, i.e., Nifty IT (121%). Auto (109%) and Pharma (108%) are
other sectors that outperformed Nifty (90%) in this timeframe.
2. Pharma has
materially underperformed metals over all timeframes. Which sounds bit
counterintuitive, given the pandemic situation.
3. FMCG is a top
underperformer over all timeframes, despite huge social sector support,
resilient rural sector, and strong corporate performances. Some of this could
be explained by significant outperformance of FMCG sector in previous year
4. Media is another
noticeable laggard, despite work from home, lockdown, etc.
5. Despite huge
outlay for capacity building in 2020 stimulus packages and FY22budget, Infra
sector has performed mostly in line with the benchmark Nifty over these
timeframes.
6. Realty has been
the worst performing sector over all these timeframes.
7. PSU Banks have
outperformed their private sector peers in 2021. This is in line with PSEs in
general outperforming Nifty in current year.
8. Announcement of
much awaited scraping policy does not seem to have nay impact on auto sector.
Nifty Auto is down 4% since budget.
9. The positive
momentum that was created in reality sector last year due to duty incentives
and lower rates seems to have subsided. Nifty Realty has underperformed
materially after Budget.
10. In FY22 so far,
Only commodities and pharma have yielded meaningful return.
