The Sleeping Heavy Weight Problem in Nifty50
I spoke about this back in 2023 as to how Smallcaps are not Diverging, but Heavies are Sleeping.
- A lot of smart people reduced Smallcaps early, looking at the Divergence.
- A lot of Fund Managers called for cutting Smallcap Weight in Sept 2023.
- Ratio Charts showing exuberance.
- Smallcap Index up 40-50% from that point at peak.
- Even now its 20-25% higher from Sept 2023.
Back to the same Sleeping Heavy Weights problem.
- Banks and Financials 36.5% in Nifty50. Underperforming since 2019-2020.
- Reliance Inds 9% weight. Ex of Jio, the return is almost zero for 5 years.
- IT Sector 10% weight. Lower than the peak of 2021. 5 years gone.
- FMCG – 6% Hindustan Unilever at the same price as in 2019-2020. ITC down 35% from its peak and at the same price as 8-10 years. ( ex div)
That’s like 60-65% of the Nifty50 has been sleeping for the last 5-6 years.
- Financials have shown the lead, and others are still sleeping.
- The problem is looking at outperformance here, a lot of people may change style from Midcap/Smallcap to Large Caps or shift more to Large Caps.
- In the near term, the shift may look great, but in the coming years?
- The same thing done in 2019 ( Nifty up 15%, Smallcap down 25-30% ) hurt everyone in 2020-2024.
- But if you are not doing research and punting random themes, Tips etc you might as well go through MFs.
- A lot of hero stocks of 2018 are still sleeping & heroes of 2024 may too.
Conclusion :
- Stick to your Style.
- You have endured 15 months.
- Be Patient and Build Conviction and Research in Sideways Market to Prosper in the Next Bull Market.
